samchain/econo-pairs-v1 huggingface dataset:
movements along the Phillips Curve) and global integration along all dimensions – labour, final goods and services, and intermediates – acts as a series of positive supply shocks that impart sustained disinflationary pressures (i.e. shifting the Phillips Curve downwards and flattening it). And just as global factors affect the relationship between domestic slack and inflation, they have made it more difficult for central banks to set policy in order to achieve their objectives. Major secular forces have lowered the equilibrium rate of interest, meaning that central banks have had to use unconventional tools in order to provide stimulus. At the same time, open and integrated markets have reduced central banks’ control over their domestic financial conditions. In the wake of such disinflationary challenges some have argued that monetary policy frameworks should be overhauled. For example, Claudio Borio recently suggested that the secular disinflationary effects from continued global integration could dominate increased cyclical inflationary pressures from a smaller global 38  Bonis, B, Ihrig, J and Wei, M (2017). ‘The Effect of the Federal Reserve's Securities Holdings on Longer-term Interest Rates’ FEDS Notes. Washington: Board of Governors of the Federal Reserve System, 20 April 2017. 39 This analysis uses the IMF’s Flexible System of Global Models, a semi-structural model of the global economy that captures international trade and financial linkages. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  output gap as the recovery progresses.

Thus far, this disinflationary effect has mostly affected the 9  prices of goods (Chart 5), as trade in goods has been liberalised to a much greater extent than services. 10  Monetary policy makers in advanced economies have responded by accommodating relatively higher services price inflation in order to meet their inflation objectives. For example, in the UK core goods prices fell an average of 0.3% over the past two decades, services prices rose by an average of 3.4% and total CPI inflation was on average at target. 11  7  The slowing of trade growth since the financial crisis largely reflects the rotation of global growth to countries with less import intensive demand, notably the US and EMEs, as well as the declining import intensity of final domestic demand in China as the composition of growth there rotates towards consumption and services. 8 This positive supply shock comes about because the availability of cheap imports improves advanced economies’ terms of trade – the price of exports relative to that of imports. For more detail on this channel, see ‘Globalisation and Inflation’, speech given by Charles Bean at the LSE, 24 October 2006. 9 Abdih, Y, Balakrishnan, R and Shang, B (2016) ‘What is keeping US core inflation low?’, IMF Working Paper No. 16/124. 10 For example, barriers to services trade are estimated currently to be up to three times higher than those for goods trade. See ‘A fine balance’, speech by Mark Carney at the Mansion House, 20 June 2017.
There could be further supply side impacts from the structural economic change or repurposing that could be needed if the behavioural changes that we have seen in response to the pandemic persist, as seems highly likely, although the sign of these impacts is perhaps more ambiguous. The letter is available on the Bank’s website at https://www.bankofengland.co.uk/-/media/boe/files/prudentialregulation/letter/2020/info-request-operational-readiness-policyrates.pdf?la=en&hash=E973B09B00A6EC1D2B5AB9B845BF20EB5EF7BBB6. 14  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  The November MPC decision isn’t for another two weeks and we have a full round of forecast and policy meetings to come between now and then. In these uncertain times, and with an array of risks to contend with, from Covid, from Brexit and from wider geopolitical developments, the MPC is clear that the range of actions that could be taken remains under review, consistent with our remit. I head into our upcoming meetings in the belief that we are equipped with an effective set of tools in our toolbox which we will be able to use to meet our remit, however the economy might evolve from here. Figure 10: Uncertainty around those projections was higher than usual and the risks were to the downside.

There are no definitive rules or prescriptions when it comes to monetary  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  policy tools, and no such thing as a manual for monetary policy makers.5 I’ll start by looking at QE, then come on to forward guidance, and finish with some thoughts on the possibility of negative Bank Rate.6 a. QE – plenty of headroom QE has been an effective tool for stimulating demand through the 11 years of its use in the UK. Even though we are well on the way to purchasing £ billion between March and December 2020, we have QE “headroom” remaining. And while it is increasingly clear its implementation and impact is state contingent7, to my mind it is a tried and tested tool and for me it is the MPC’s marginal policy tool at present. The headroom point is worth expanding on because it is one that isn’t always appreciated. There are £ of conventional gilts in “free float” by market value (as well as another £ of index-linked gilts which are out of scope)8. The Bank’s Asset Purchase Facility holds approximately £ of those9: so there is a further £ remaining in the market that could potentially be available for purchase. In practice the Bank does not buy very short maturity gilts. And to avoid distorting the market it avoids specific gilts where it holds more than 70% of the free float, and attempts to buy evenly across three maturity “buckets”.
Times will become more demanding for the clusters of oil suppliers in Sørlandet, Nord-Jæren, Haugalandet and Stord and for manufacturing in Kongsberg, Grenland, Helgeland, Salten and Ofoten. 8  16  The historical figures are based on trend calculations. The figures for these years are therefore based on economic developments later in the 1990s. The degree of tightening may therefore also appear greater in retrospect. BIS Review 15/2010  Fortunately, manufacturing districts have shown the ability to adapt. Research shows that the degree of geographical and occupational mobility is high for the Norwegian labour force. Few people remain permanently outside the labour force after a period of restructuring. 9 But the communities are small and vulnerable and may disappear if the industry structure becomes too narrow. And as mentioned, the most important, perhaps the only, instrument available to the authorities in addressing this challenge is to restrain petroleum revenue spending in the Norwegian economy. The management of petroleum revenues It took a generation from the time the first oil field was discovered in the North Sea until the government began to set aside economic rent. The Government Petroleum Fund was established in 1990 and the first transfer to the wealth fund was made in 1996. Each year since that time, as a savings plan, the government has transferred a portion of current income from petroleum activities as deposits in the fund. Today, the value of the fund is around NOK 2.6 trillion, or slightly higher than annual GDP in Norway.

We have been able to draw lessons from both positive and negative outcomes of  14  BIS Review 15/2010  such a policy in the 1970s and around 1990. There may be material here for a “handbook” of effective Keynesian use of instruments. First, when demand for goods and services and inflation prospects fall, the interest rate is lowered. At the same time, the automatic stabilisers in the budgets will work when tax revenues fall and benefit payments increase. When the fall in demand for goods and services is so steep that an interest rate close to zero is not sufficient, tax rates are reduced or government measures are applied. The measures should not influence long-term public sector priorities such as the size of the welfare state or the permanent tax level. When the economy turns, as it now has in Norway, the rule is that fiscal policy should be tightened fairly rapidly. This provides room for growth in the business sector. When public expenditure has been reduced, the key rate can then be increased to a normal level. According to the fiscal policy guidelines, petroleum revenues should be phased in gradually into the economy, approximately in pace with the expected real return on the Government Pension Fund Global, which is estimated at 4 per cent. In periods of high or rapidly rising unemployment, petroleum revenue spending can be increased, and inversely fiscal retrenchment is needed during periods of high economic activity and resource shortages.
Presentation in Vienna). 4  BIS central bankers’ speeches  Secondly, we should bear in mind that a country-specific difference in banking regulation is nothing new. Even before the financial crisis began in 2007, both the Swiss big banks were subject to stricter regulations in terms of capital requirements than their competitors in many other countries. As already mentioned, FINMA ruled, in autumn 2008, that as of 2013, both big banks will have to hold double the amount of capital specified in international minimum standards. The current “Swiss finish” therefore calls for an extra 100%! However, these regulatory differences do not seem to have harmed the Swiss financial centre in the past. On the contrary, Switzerland’s banks have always had a tradition of a “Swiss finish”. Stability is one of the Swiss financial centre’s clear competitive advantages and has made a significant contribution to attracting customer assets and companies to Switzerland. A consideration of regulatory differences in their entirety Let us now take a closer look at the possible regulatory differences in connection with current trends in Switzerland and other countries. How significant are these differences? First of all: the thrust of international capital regulation is the same everywhere – more capital, stricter risk weighting and systemic importance to be taken into account when deciding how rigorous the regulation should be.

Furthermore, a look at the various regulatory packages in their entirety shows that the future requirements for internationally active, systemically important financial institutions will be designed differently at global level. Ultimately, however, they will differ in rigour only as far as the respective national regulators deem necessary in response to country-specific risks. Is the Swiss package of measures being introduced too quickly? A third objection concerns the pace of the regulatory reforms. Compared with other countries, the implementation of the Swiss package of measures is regarded as too hasty in some quarters. One concern is that significant aspects have not been properly considered when drafting the package, with the ultimate consequence that the TBTF problem is not tackled effectively. First of all, it is important to remember that the latest crisis reached its peak some three years ago. It is therefore entirely inappropriate to refer to the Federal Council’s proposal as hasty. On the contrary, the committee of experts worked intensively on drawing up a proposal supported by all groups involved. The administration conducted a thorough analysis and carried out an extensive consultative process. The Federal Council has thus been able to put forward a sophisticated package of measures. This method of proceeding is in keeping with the Swiss tradition of taking the necessary action while avoiding snap decisions. However, actually implementing these rules will take some time. Because of the pressing need for reform in Switzerland, it is not practicable to wait for the international bodies to complete their work in this area.
Given that the debt ratio stood at 98.3% of GDP in 2017, the latest year for which data are available, this rule would require an average annual reduction of 1.5 pp of GDP over the next decade. 2.4  Government debt in the Draft Budget  According to the Draft Budget, the general government debt ratio will fall by 1.5 pp as a percentage of GDP, from 96.9% estimated in the Draft Budget for 2018 to 95.4% in 2019, continuing along the path of gradual decline observed since 2014 (see Chart 11). This is a result of the expected favourable development of nominal economic growth. However, if the upside risks to the government deficit referred to earlier were to materialise, the reduction in the debt ratio would be more moderate. BANCO DE ESPAÑA  12	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  FUE  3  Fiscal policy challenges  The accounts presented should also be assessed from a more general standpoint. Accordingly, before ending, I will now refer to some of the challenges facing Spanish public finances. First, it is essential that we move towards lower public debt levels (see Chart 12). The empirical evidence shows that maintaining a very high level of public debt over a prolonged period may have negative effects on economic growth.

In view of the medium-term challenges posed by the high debt-to-GDP ratio and the impact of population ageing on public expenditure, the process of redressing fiscal imbalances must be compatible with an increase in the quality of public finances. In this respect, the composition of the income/expenditure adjustment in the necessary mediumterm programme is of utmost importance in order to achieve the objectives set without BANCO DE ESPAÑA  14	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  THE QUALITY OF PUBLIC FINANCES  CHART 14  TAX STRUCTURE IN SPAIN  GENERAL GOVERNMENT INVESTMENT % of GDP  % of public expenditure  12  18  10  15  8  12  6  9  4  6  2  3  0  0  100 90  70  75  80  85  90  95  00  05  10  PUBLIC EXPENDITURE IN SPAIN (2017)  80  CONSUMPTION  70 60  CAPITAL  50 40 30 20  LABOUR  10 0  16  2017  GEN. GVT. (% of GDP)  GENERAL GOVERNMENT  SOCIAL SECURITY  GEN. GVT. (% OF TOTAL EXPENDITURE) (right-hand scale)  REGIONAL GOVERNMENT  LOCAL GOVERNMENT  SOURCES: IGAE, INE and Banco de España. hampering economic growth.
I would agree that there are certainly some common features, and indeed we would usually review as part of our own work the work done by the audit department on identifying areas of potential risk and control problems. Similarly, external auditors’ observations and recommendations are often very useful to us in coming to a judgement on the effectiveness of an institution’s internal controls. However, to supervise an institution effectively a supervisor needs, in my opinion, a means of independently verifying that internal controls are sound and that all substantive risks have been identified and considered. For this reason, our ongoing dialogue with institutions, and our periodic on-site examinations of institutions’ activities, are invaluable. I believe this oversight can also be beneficial in a practical way to the institution itself. For example, we may have insights that the institution does not. We may be able to give an institution feedback on how it compares vis-à-vis its peers in similar areas and to indicate respects in which, from our experience, its controls and risk management processes are falling behind the game. I would not want to overplay this “management consultant” type role, but I think it can be beneficial, perhaps especially to the smaller, less sophisticated financial institutions. Of course, this presupposes that we have the necessary expertise to offer useful advice. This is a constant challenge in today’s environment of rapid technological change and product innovation.

While I hope my advice may be of some help, the responsibility for ensuring that your institution has the right controls and the right culture is yours. So I hope this conference provides you with some useful, practical ideas for improving your institutions’ controls when you return to work. BIS Review 48/1998
The issue of authority for central banks begins, in all cases, with the law, and includes the obvious questions of what kind of law is suitable for a particular central bank; how you change a law that is no longer suitable; and what is the optimal timing and strategy for changing the law. But, as your discussions have stressed, there is more to this than the mere word of the law. An interesting aspect of the sharing of experience here has been the extent to which central banks have worked with - and sometimes around - laws that have become inadequate to the needs of modern central banking. As I mentioned in my opening remarks, in the case of the HKMA it has been a question of working without the law, since Hong Kong has no formal central bank law, and we rely on just a few lines of a single statute for our authority. A further point that has been made strongly is the need to base the legitimacy, the credibility of a central bank on something more than just statutes and regulations. This brings into play the question of accountability, through both formal and informal channels. I know that a great deal of your discussion has focused on the role, composition and responsibilities of the board. More broadly, there has been equal emphasis on how we account to the wider public.

Both processes throw up a peculiar, and quite perplexing challenge: how to present our work and achievements in terms that are comprehensible and acceptable to the many non-specialists on our boards, and to the multitude of non-specialists among the general public. Because of the business background of many board members, and because of the natural human desire for clarity and simplicity, this increasingly boils down to a quest for setting down specific, quantifiable targets by which our performance can be measured. This presents enormous difficulties, even in policy areas that might seem easily amenable to quantification. And the challenges become still more complex when performance is linked to pay. The same problems of clarity and simplicity arise in the operation of transparency, an issue closely linked to accountability, and something which has, I believe, suffused all of the discussions these last few days. There has been a shift in the approach to this subject in recent years, from a broad assumption of confidentiality, except where exceptions can be justified, to something approaching the opposite: transparency and openness in all things except where market or commercial sensitivity, personal privacy or the public interest require otherwise. This is a healthy development. But it is also something that has been forced on many of us by financial or political crisis - through the sudden and often painful realisation that our actions have been inadequately explained, misrepresented and misunderstood. Central banks have been quick to learn from these episodes.
It has been decided to bring forward a number public sector construction projects and launch the expansion of the Nordurál aluminium smelter at Grundartangi. Furthermore, activity on the Kárahnjúkar hydropower project will be more intensive than was previously assumed. Combined with the cut in the Central Bank’s policy interest rate in February, these three factors will lead to more demand in 2003 and 2004 than was assumed in the national economic forecast, and all things being equal this will spur GDP growth. Central and local government authorities have decided to bring forward construction projects amounting to a total of 10 b.kr., of which roughly 5½ b.kr. will be made in 2003 and 4½ b.kr. in 2004. Plans have been made for expanding the Nordurál aluminium smelter in two phases. Production capacity will be stepped up by 90 thousand tonnes per year in 2005 and by a further 60 thousand tonnes in 2008 and 2009. In connection with the expansion, projects will be undertaken at Nordlingaalda, Nesjavellir and Reykjanes to supply power for the smelter. Investment on account of the Nordurál expansion will total 2½ b.kr. in 2003 and 14 b.kr. in 2004. According to the latest projections by Landsvirkjun [the National Power Company] for hydropower development at Kárahnjúkar its expenditure on the project will be 5 b.kr. higher in 2003 than previously estimated, and just over half a billion kr. greater in 2004. 4  BIS Review 18/2003  In all, this represents a total extra investment of 13 b.kr.

On the assumption that the three-month Libor rate will remain stable at 0.75% during the next three years, inflation should average 0.7% in 2003, move up to 0.9% in 2004 and reach 1.6% in 2005. Forecast inflation will remain below 1% until the end of 2004 except in the fourth quarter of 2002. In the course of 2005, however, a marked acceleration will set in, with forecast inflation reaching the 2% mark in the fourth quarter of 2005. The new forecast is consistently below that of June 2002. It reflects the delay in the economic upswing. In the new forecast, inflation will rise more markedly at the end of the forecasting horizon due to an even more expansionary monetary policy since June. Expansionary monetary policy to be continued At our last media conference, I pointed out that the National Bank must be prepared to react quickly to changes in the economic situation. When the delay in economic recovery became discernible in summer, we acted immediately by again lowering interest rates. Since then, nothing of basic significance has changed in our assessment of the situation. We shall adhere to our expansionary monetary policy in the foreseeable future. We will thus contribute to the economic rebound and continue to keep Swiss franc investments unattractive. The low interest rate level and the relatively strong growth of monetary aggregates currently do not represent a threat to price stability. Once a sustained economic recovery becomes discernible, we shall have to review our monetary policy and adjust it to the new circumstances.