samchain/econo-pairs-v1 huggingface dataset:
The new thing would be to combine those ingredients together, at scale. The question of whether to do so is complex, and beyond the scope of my remarks today. The UK will publish a consultation on this issue later this year. But the implications for central bank balance sheets will also depend heavily on how any CBDC is designed: on who can hold it, where it can be used, how much can be held, and whether it is interest-bearing (Table 1). The Bank of England’s work in this area is available at: UK central bank digital currency | Bank of England. 1  Bank of England  Page 3  Source: Bank of England  Design choices that placed the economic features of CBDC close to today’s banknotes might have relatively limited implications for central bank balance sheets, at least in normal economic conditions. Choices that positioned the economic features of CBDC closer to today’s retail commercial bank deposits could have a more material impact. To give some sense of potential scale, Chart 1 compares two stylised benchmarks – the stock of banknotes; and 20% of retail commercial bank deposits2 – to the size of central bank balance sheets between the period before the Global Financial Crisis and today. In the UK, the upper end of that benchmark range is nearly half the size of the Bank of England’s balance sheet today, and six times that in 2007.

My speech will endeavour to outline the arguments that support the opt-in decision for Romania, but I believe that, despite the slightly different circumstances, the reasoning also holds true for other non-euro area countries – such as Poland, Hungary, the Czech Republic or Bulgaria. General remarks Before dealing with the arguments underpinning our position regarding the Banking Union, let me give you a short account of Romania’s recent economic history that should enable all of you to better understand our particular circumstances. No doubt the crisis has taken its toll on Romania’s economy, given the large imbalances which had been steadily accumulating during the boom years. Whether the crisis has ended or not on the European level is still a matter of debate. What may be said for certain is that Romania undertook the necessary adjustments during the 2009–2012 period and the preconditions for sustainable growth are now in place. Indeed, the outcome of these adjustments may already be seen in the 2013 economic performance, which hopefully marks a turnaround in Romania’s economic development: •  rapid (judged by the current standards in the European Union) economic growth, namely 3.5 percent,  •  sizeable adjustment of the current account deficit, from the double-digit area (between 2006 and 2008) to 1.1 percent,  •  historically low inflation (1.55 percent at the end of the year),  •  fiscal deficit well below 3 percent.
In other words, the private sector in aggregate was neither saving nor dissaving to any great degree. 4  4  See IMF Financial Soundness Indicators. BIS central bankers’ speeches  By 2010, the private sector had switched to a large financial surplus of 7.2% of GDP in the US, 8.2% of GDP in the UK and 5.8% of GDP in the euro-area. The private sector was now saving and in significant scale. This precautionary behaviour, as after the Great Depression, has proved persistent. It has only recently started to normalise. This is a 21st century paradox of thrift and precaution. The psychological scars of the Great Recession, as after the Great Depression, have proved lasting and durable. They help explain the sluggishness of the recovery, and the adhesiveness of interest rates, since the crisis. And, if the past is any guide, these scars may heal only slowly. Recession risk Psychological scarring affects how people perceive and respond to risk in the past. As important for monetary policy, however, is the economic and financial risk people expect to face in future. Another lower left tail event could further frazzle the nerves and set back recovery and risk appetite. Just how likely is that? Looking at the long-run pattern of growth, across countries and time, gives some guide to the probability of a future tail event, such as a recession. As Chart 8 illustrates, the historical distribution of growth is fat-tailed and negatively skewed (Haldane (2012)).

Earlier this year, I used the central paths from the February Inflation Report to generate some interest rate trajectories, assuming monetary policy was set to minimise current and future deviations of inflation from target and output from trend (Haldane (2015b)). It is useful to update these interest rate paths for the MPC’s latest GDP and inflation forecasts. These are shown in Chart 14. The interest rate profiles are relatively similar to those in February. As then, they suggest the optimal path for interest rates involves an immediate cut in rates for about a year, which pushes inflation back to target and closes the output gap. Thereafter, interest rates rise gradually in line with the market curve. As with any model-based simulation, these interest rate paths are no more than illustrative. Nonetheless, I find they serve as a useful benchmark: what is it about the economy, not captured by the model, which would cause me to deviate from this path? Earlier in the year, these types of simulations played a role in my judging that a neutral stance on the future direction of interest rates was a prudent course. One important drawback of these model-based simulations is that they tend to underplay the effects of risk, focussing instead on central paths for growth and inflation. So how might risks, including dread and recession risk, affect the path of demand and the optimal interest rate trajectory in the period ahead? In principle, dread risk affects demand in two ways.
One reason for this, I believe, is that economic policy has not in practice been aimed at putting people in work. One example is that the compensation levels in several transfer payment systems were increased during the late 1990s. Now other changes are being discussed which would directly and tangibly have the same effect, for instance, a reduction in working hours. Another problem in this context is that the Swedish labour market has not been able to make adequate use of the many people in Sweden who were born abroad. The employment frequency among these people has been much lower than the employment frequency among people born in Sweden. This applies in particular to those who have arrived here quite recently. They include many university-educated or otherwise highly-qualified people who are completely without work or have jobs below their level of competence. In addition, the problem is exacerbated by the fact that the population's age structure in the near future will become less advantageous from a labour force perspective, with increasing numbers of exits from the labour force. An ever declining group of workers will have to support an ever increasing number of people, unless measures are taken. It is easy to see the significance for economic growth of measures to increase the labour supply. For example, the number of hours worked could increase by an average of 0.4 percentage points more per year if it were possible to halve the number of people on sick leave by 2008.

This means that the number of hours worked could increase by an average of 0.8 per cent annually instead of 0.4 per cent  4  BIS Review 44/2003  during the period up to 2008. If it was also possible to break the negative trend for persons born abroad and bring them into the labour market to a greater extent than now, this would also increase the number of hours worked. In 2002, 75 per cent of the working-age population was employed on average, while the figure for those born abroad was 60 per cent. If it were possible to increase the employment rate for this group to the national average, the number of hours worked would increase by approximately 0.1 percentage points more up to 2008. Ensuring that persons with a non-Swedish background can enter the labour market is a central issue, partly because the net addition to the working-age population will come from this group over the coming decade. If no measures are taken to increase the labour supply, the Swedish economy's long-term growth prospects are likely to be subdued for a fairly long period. The Riksbank usually states that the potential growth rate lies in the interval 2-2.5 per cent. If nothing is done, it is likely that potential growth will decline. In concrete terms, this means that the Swedish economy could reach its capacity ceiling at an earlier stage.
But it is also important to maintain the peer pressure that has been used to ensure that the member states observe the common rules. Arguing the case for adhering to these rules in a country’s internal debate is difficult if other member states lower their ambitions. BIS Review 76/1999  4  Policy interaction Economic policy in the euro area is accordingly formed in the interaction of the single monetary policy and what are primarily national fiscal and structural policies. If this interaction is to function properly, much is required of the parties involved in the way of clarity and a dialogue. The available structure for coordinating economic policies in the European Union consists of a network of different bodies and reports, with the ultimate purpose of arriving at a shared picture of the framework for economic policy. The forms for cooperation are being developed all the time and a number of new instruments have been introduced in recent years. A schedule has been established for the continuous exchange of information and views during the year between the member states, the Commission and other Community bodies, including the ECB. Reports on compliance with the guidelines for fiscal policy, employment and structural policy are submitted by each country for discussion and examination by the other member states, the Commission and the ECB.

These could be generated, for example, by a failure of a large and complex financial institution through payment and settlement  BIS Review 91/2001  3  systems and securities markets. We have also considered that the traditionally expressed arguments in favour of separating prudential supervision and central banking would not be very convincing in the specific euro area conditions. For instance, the concern of conflicts of interest with monetary policy and a lack of domestic accountability should not be overstated in our setting where monetary policy is centralised and supervision remains national. Still dispersed retail markets Despite the progress I have mentioned, the markets for retail financial services are still defined quite strongly along national, or even local, lines. In these markets, for instance, interest rates are based on local competitive conditions, as you know very well. However, this does not mean that there is no international competition. The fact that this Association has now existed for thirty years is a clear sign that financial institutions have already been international for a long time. Internationalisation of retail operations Until now, branches and subsidiaries abroad have been preferred to large-scale mergers as a strategy for entering foreign banking markets. The establishment of foreign branches and subsidiaries has increased steadily in the euro area. For example, the number of foreign branches of German banks in the European Union is now 59, almost double that of 1995.
Flavours of inflation persistence For data series that exhibit ‘mean reversion’ – in other words series that return to some average level after being shocked away from it – persistence is typically understood in terms of how long it takes to get back to that average level. [7] Given the MPC’s mandate, CPI inflation will revert to 2% over time. But it is taking longer to return to target than was originally expected, and longer than is desirable. From a policy perspective, we want to understand why this persistence in inflation has emerged. In thinking about that, it is helpful to distinguish between different sources of persistence. [8] One reason for inflation to have risen above target is that there have been a series of inflationary shocks to the economy, each of which was transitory in itself but – by dint of coming one after the other and operating in the same direction – led to greater persistence in headline inflation overall. Page 5  I label this a form of extrinsic inflation persistence. Such an account resonates with the way the MPC has described the inflation process over the past couple of years. [9] Inflation first rose on account of bottlenecks in international goods markets that emerged from the interaction of disruption to global supply chains and changes in the pattern of consumer demand, both stemming from the lockdowns triggered by the onset of the Covid pandemic.

Yet the level of European wholesale gas prices has fallen substantially further towards its prepandemic level in recent weeks, perhaps suggesting that the intensity of attempts to avoid the costs implied by a terms of trade deterioration are likely to abate, with the strength of intrinsic inflation persistence set to fall in parallel. Judgements along these dimensions will shape my assessment of how persistent the current elevated level of inflation will prove, and thus what the appropriate monetary policy choices will be. This discussion can be placed into a bargaining framework. Imperfect market competition leads to the creation of some ‘economic surplus’ that has to be distributed across various competing actors. [25] Given the deterioration in the terms of trade, more of that surplus has to be given to foreign suppliers of energy. That leaves less to be shared among domestic residents. A bargaining process will determine how the remaining smaller economic surplus is distributed, as each group or actor seeks to preserve their own real spending power. There is a tendency to view this bargaining process as a confrontation between ‘workers’ and ‘firms’, and some of the media coverage likes to interpret central bank statements in that light. But any economic transaction involves distribution of some ‘economic surplus’ between a buyer and a seller. In a market transaction, the more effective the seller is in extracting that economic surplus, the higher the resulting market price will be.
Following the meetings of the Open Market Committee in August, September and October, the Federal Reserve stated that there is a risk of a further and undesirable fall in inflation, and that it was therefore likely that short-term interest rates in the US will remain low for a considerable period. Interest rates in other countries are also likely to remain low. In the euro area, developments have been considerably weaker, even though there are now signs that the trough has been reached. Growth among Norway’s trading partners as a whole is expected to pick up over the next two years. The Reserve Bank of Australia and the Bank of England recently raised their key rates. The interest rate in Norway has been lowered substantially. The interest rate cuts must be seen in connection with the change in the inflation outlook, which has occurred as a result of weaker global economic developments and low international interest rates. The key rate has been reduced with a view to bringing inflation back to target at the two-year horizon. Moderate pay increases in this year’s wage settlements and prospects for wage growth falling to a more sustainable level for a prolonged period have been an important factor behind the considerable easing of monetary policy. An interest rate as low as 2½ per cent, however, largely reflects a long period of low interest rates abroad with little prospect of an increase in the near future in the largest economies.

Following a public consultation process, its final version is about to be published and we expect it to be a relevant contribution to the development and updating of our retail payments market. The new regulations not only set the prudential requirements for non-bank prepaid card issuers. It also narrows down the scope of regulated entities dealing with the processing of transactions, and changes their capital requirements, aiming to facilitate the entrance of new participants to the acquiring and processing business. By removing requirements that may be burdensome for small entities, and by considering explicitly the possibility of non-physical payment cards, as well as remote purchase and acquiring, we expect to see the retail payments market in Chile taking a new shape in the near future. That almost certainly would involve—and perhaps require—and active participation of FinTech entities. These features give some ground for optimism on the potential contribution of FinTech not only to the democratization of financial services but also to price and financial stability and development in Chile. Ladies and gentlemen, A few blocks from where we are gathering today, on Regent St. and Park Terrace was the bank branch where I opened my checking account as a Cambridge student. There I was handed my first debit card, which I could use to withdraw cash from the automatic teller outside. Coming from a country where banks were places where people lined up in front of a human cashier to perform basic banking transactions, these seemed enormous changes to me.
Thus, even with a return in equity and fixed income markets of minus 19 percent measured in NOK, the capital in the GPFG only fell by approximately NOK 5 billion in 2002.4 In 2008, the sum of the negative return, the change in the krone exchange rate and transfers of petroleum revenues was positive, and the value of the GPFG therefore increased between 2007 and 2008. The next time equity prices fall, the figures will be different. As the government’s oil and gas revenues decline and the size of the GPFG increases, the cushioning impact of petroleum revenues on any falls in the fund’s value will gradually decrease, making the fund’s value even more dependent on the return. In years of negative equity market returns, large absolute falls in the GPFG’s value must be expected. A second lesson is that stock market crashes do not necessarily reverse quickly. The examples I have referred to, the financial crisis in the US, the dotcom crash, and Japan in the 1990s, show that the crises we have observed in the past can vary in depth and duration. The path of the recovery since the dotcom crash has been somewhat U-shaped. Although the fall in market values was not as steep as in 2008, the recovery was slower. Developments in Japan have been more L-shaped: the fall was rapid and the recovery has been slow. Developments since the financial crisis have been V-shaped: a steep fall and a rapid recovery. All these crisis scenarios could occur again.

As shown in Chart 3, 2008 stands out as one of the worst years in this period. Ten years ago, on 25 November 2008, Norges Bank presented the GPFG’s results for the third quarter. Lehman Brothers had gone bankrupt. The world’s central banks were making large and frequent cuts in policy rates. In the course of autumn 2008, the US stock exchange fell more than five percent on as many as ten separate days. Norges Bank wrote in its press release that “The third quarter of 2008 was an unusually demanding quarter for the management of the Government Pension Fund – Global.” And it was to get worse. The GPFG posted a return for 2008 of minus 23 percent, measured in terms of the fund’s currency basket. Chart 4: Post-crisis paths have differed Chart 4 shows developments in the US equity market from 2008 onwards. The rapid reversal in equity markets, shown in the chart, also affected the GPFG’s results. In 2009, the fund posted a positive return of 26 percent, largely thanks to a 34 percent return on the equity portfolio. The return continued to rise in 2010. While the fall in the fund’s value as a result of the financial crisis in 2008 was historically large, the fund’s recovery in 2009 was stronger and faster than had generally been expected. Owing to a weakened krone, the GPFG’s return was less negative in terms of NOK than in terms of the fund’s currency basket.
These certifications will reduce costs and increase efficiency of our banking system operation. Complete re-scanning of our financial system – in collaboration with the World Bank and the IMF – (financial Sector Assessment Program) – to enable the identification and correction of its weak points in a timely manner. I consider that special attention will be paid on: the activity of non-bank financial institutions and convergence of their practices and regulations with those of the banking system. This will boost the effectiveness of financial system and fair competition within and among various segments of this system; fully efficient operation of the supervisory architecture of our financial system, starting from the Financial Stability Advisory Group (FSAG) and continuing with the practices on information share and collaboration amid its regulatory institutions; continuing the work for the reduction of foreign currency use in Albania, aiming at increasing awareness of both public and private actors on the risk it bears, thus by strengthening the response of the Albanian institutions. Third priority relates to encouraging formalisation, and increasing both financial education and inclusion. The relatively high level of informality in the Albanian economy stems serious negative consequences, through putting in threat competition, increasing uncertainty in commercial and financial relationships, and reducing public revenues. In this view, the Bank of Albania will continue to work to strengthen formalisation of the economy.

Growth forecasts have been revised downwards as a result of the interest rate increase in July. GDP growth will pick up, but will remain below the growth potential next year. The internationally exposed sectors of the economy are moving on a different path from some sheltered industries. Whereas private consumption is buoying demand growth, scaling back is expected in the manufacturing industry. Frictional unemployment is expected to rise. High real wage growth is resulting in divergent developments between private and public consumption. A large share of the growth in public spending will go to covering higher labour costs in the central and local government sector. As a result there will be little scope for increased activity in the public sector, and instead high growth in private consumption. A time horizon of two years for interest rate setting allows monetary policy to contribute to stabilising production. This horizon prevents monetary policy in itself from causing unnecessary fluctuations in the economy. As an alternative, we could have sought to achieve the inflation target of 2½ per cent using a time horizon of six months to one year. We would then have had to reduce the interest rate sharply this summer. This would have amplified the pressures in the Norwegian economy that are so clearly reflected in wage developments and household demand for loans. In all likelihood, this would have required marked interest rate increases one to one and a half years ahead.