samchain/econo-pairs-v1 huggingface dataset:
This underscored the pitfalls of a design that relied too much on the national level to fulfil the stabilisation function. Second, the financial crisis demonstrated that financial contagion is the unintended consequence of financial market integration. The euro area, however, was lacking effective instruments to mitigate contagion. Policy instruments that can act as circuit breaker, limiting thereby negative feedback loops, are an essential crisis management tool in a monetary union. To summarize, one of the key lessons that we have learned from the crisis is that the design of the euro area was incomplete. Indeed, the euro area lacked certain institutional elements which are associated with federations and which act as crisis prevention mechanisms ex ante as well as shock absorbers ex post. The logical corollary is that we need to compensate for these “missing institutions” by establishing a much stronger financial and economic union. I will now outline the main elements of that endeavour. I will first discuss reforms implemented at the national level – though sometimes also decided in the context of EU-IMF lending programs – and then move to the reforms at the EU or euro area level. 4. The road ahead towards deepening the union  4.1  Reforms at the national level  Almost six years down the road since the start of the financial turmoil that turned into a crisis, many euro area countries have experienced a significant, although to date still partial, correction of external and domestic imbalances.

Global economic outlook  Let me turn to the global economic outlook. Growth was modest in the advanced economies in the first quarter of 2023. Although inflation declined again in many countries, it remains clearly above central banks’ targets. Core inflation in particular is still stubbornly elevated. Page 2/8  Zurich, 22 June 2023 Thomas Jordan, Martin Schlegel and Andréa M. Maechler  News conference  Against this background, numerous central banks have tightened their monetary policy further, albeit at a somewhat slower pace than in the previous quarters. The growth outlook for the global economy remains subdued. This is in particular attributable to the loss of purchasing power due to inflation in recent quarters and to tighter monetary policy. At the same time, inflation is likely to remain elevated worldwide for the time being. Over the medium term, however, it should return to more moderate levels, not least thanks to the more restrictive monetary policy and due to the economic slowdown. Our scenario for the global economy remains subject to large risks. In particular, the high level of inflation in some countries could be more persistent than expected. Equally, the energy situation in Europe could deteriorate again in Q4 2023 and Q1 2024. Swiss economic outlook  What is the economic outlook for Switzerland? GDP growth was solid in the first quarter of 2023. The services sector gained momentum, and there was also a slight increase in value added in manufacturing. The labour market remained robust, and overall production capacity has been well utilised.
In addition to the setting up of the European Systemic Risk Board, entrusted to monitor financial stability, the European Commission presented six legislative proposals, the so-called Six-Pack.4 These were aimed at strengthening the preventive and corrective action needed to ensure fiscal sustainability, reducing macro-economic imbalances, and promoting competitiveness. They were approved by the European Parliament in September and will come into force in January 2012. In launching these measures the European Authorities recognised that in a single currency area there are limitations to the debt that can be issued by participating sovereign Member States. Essentially, we are going through a period of further development of the currency union and the implications this has on other aspects of governance. Lessons from the crisis From a national perspective, at the policy making level, there are a number of lessons that can be learned from the sovereign debt crisis. As I highlighted earlier, macroeconomic imbalances and unsustainable fiscal policies were the root cause of the sovereign debt crisis in Europe. The example of Ireland is a reminder that while strong GDP growth is a desirable goal, what ultimately matters is that such growth can be sustained. In turn, competitiveness is the key for a country’s success in achieving sustainable growth and improvements in living standards. 4  See European Commission, EU Economic governance “Six Pack” – State of Play, Brussels, 28 September 2011.

Thankfully, Marvin, along with others, helped lay the intellectual groundwork and created the vocabulary for us to work through some of the most significant issues facing central banks. His work is a true emblem of how researchers play a vital role in informing and shaping the policy discussion. I look forward to the upcoming conversation. Thank you. 1 Jeffrey C. Fuhrer and Mark S. Sniderman, Conference Summary, Journal of Money, Credit and Banking, Volume  32, Number 4, Part 2, pp. 845–69, November 2000. 2 Marvin Goodfriend, Overcoming the Zero Bound on Interest Rate Policy, Journal of Money, Credit and Banking,  Volume 32, Number 4, Part 2, pp. 1007–35, November 2000. 3 Board of Governors of the Federal Reserve System, Transcript of the Federal Open Market Committee Meeting  and presentation materials, January 29–30, 2002. 2/2  BIS central bankers' speeches
In the medium term, the renewed service will enable access with a simpler and more proportionate onboarding processes including streamlined testing requirements and interfaces such as Application Programming Interfaces (APIs). And increasing capacity significantly to facilitate more participants. This in turn should support greater innovation and competition within the payments sector in the future. Wider interoperability: Further down the line the CHAPS implementation of ISO 20022 will align with the UK’s forthcoming new retail payment system – the New Payments Architecture (NPA) for retail payments. The implementation of a common messaging approach – through the UK’s ISO 20022 Common Credit Message (CCM) – will deliver wider interoperability between payment types and makes it easier to switch between payment systems should the need arise. The Bank also continues to work with other central banks and operators to ensure that as a global standard, this provides greater interoperability and harmonisation with other international payment infrastructure – leading to an improved user experience, more efficient fraud detection and increased efficiency. Improved user functionality: The new system will be designed to better support the needs of users, for example enhanced liquidity management, the introduction of APIs and greater data availability. 3/6  BIS central bankers' speeches  Strengthened end-to-end risk management: Since the operation of CHAPS was brought inhouse in November 2017, we have introduced a more robust system with greater oversight and governance.

A number of actions have already been completed to enable the targets, currently being consulted on by the FSB, to be met.11 The importance of progress in this area was highlighted in the recent G7 Communique.12 The improvements we are making to RTGS, will help us to deliver key elements of the FSB roadmap. Key elements include the implementation of APIs, the capability to extend operating hours, synchronisation and our first key milestone of the implementation of the emerging global standard for financial messaging in payments ISO 20022. Future proofing the payments infrastructure Innovation is crucial to the future payments landscape. It is not a single act: it needs to be continuous. We are building a renewed RTGS service as a modular flexible platform so we can introduce new features in an agile flexible way with less cost and less risk, to enable us to respond more quickly to market changes and continued innovation in payment technologies. We 5/6  BIS central bankers' speeches  already plan further enhancements following the replacement of the new our core ledger in September 2023. This will include the ability to connect via multiple message networks, additional APIs, consideration of extended operating hours and synchronisation functionality. It will also include improved contingency functionality to enhance resilience. These ideas have been developed in conjunction with industry, and we will be consulting later this year to help to prioritise the enhancements. I encourage you to actively participate in this consultation and to help shape the next phase.
The use or misuse of forecasts has caused problems for both the Bank of England and the Met Office in recent years. The Bank’s forecasts of inflation were criticised for overstating the size of confidence intervals during the period from 1995 to 2007, the so-called “Great Stability”, and then understating them once the financial crisis occurred. And the Met Office has recently announced that it will no longer publish forecasts for the weather in forthcoming seasons after it “failed” to predict the cold winter or the wet summer (in some parts of the country) last year. The seasonal forecasts will be replaced by monthly predictions. In a statement, the Met Office said, “by their nature, forecasts become less accurate the further out we look. Although we can identify general patterns of weather, the science does not exist to allow an exact forecast beyond five days, or to absolutely promise a certain type of  BIS Review 36/2010  1  weather”. But to publish forecasts only when the outcome is virtually certain would be an admission of at least partial defeat. If descriptions of probability distributions are misinterpreted by the media or the public, how can we discover which messages are robust and which are too fragile to survive the process of communication to a wide audience? First, we need to consider how we should form a view of the likelihood of different outcomes. 2. Unpredictability in economics and science  Unpredictability is a challenge faced by practitioners in many disciplines.

Overall, however, both from the point of view of how policy is determined, as well as how it is communicated, it is the broad distribution that matters. 8. Conclusions  Self-confidence is infectious. It can also be dangerous. How often have we drawn false comfort from the apparent confidence of a professional advisor promising certain success only to be disappointed by subsequent performance? Uncertainty pervades almost all public policy questions. Economics and many other disciplines are united by a common need to grapple with complex systems. As the crisis of the autumn of 2008 showed, such systems can sometimes be subject to abrupt changes, the precise timing of which cannot easily be identified in advance. But policy-makers are often expected to anticipate the unpredictable. How can they retain the trust of the public while being open about the true degree of uncertainty? Or, to put it another way, what is the appropriate bedside manner for policymakers when dealing with complex uncertain problems in a public debate? We have explained how the Bank of England tries to deal with some of those challenges in the context of monetary policy. We are sure we have much to learn, and our efforts to improve communication will continue for a long time to come. References Anderson, R and May, R (1991), “Infectious diseases of humans: dynamics and control.” Oxford University Press. Arrow, K (1995), Interview with “The Region” magazine, available http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3675. at  Asch, S E (1951), “Effects of group pressure upon the modification and distortion of judgment”.
Sources: European Commission, Thomson Reuters and Norges Bank  Technological advances have reduced the relative cost of capital goods. Tasks have been taken over by robots and other capital equipment. This probably explains some of the decline in the labour share.7 The emergence of global technology companies is also reducing the labour share. With broad platforms and vast numbers of users, they dominate the market, which translates into both market power and substantial profits. The winner takes all. A few technology companies stand out by virtue of their size (Chart 7). Alphabet is one example. 80 percent of the world’s web searches are done through its Google search engine.8 Another example is Amazon. In 2017, the company accounted for 44 percent of all US online retail sales. Chart 7 The world’s largest listed companies. Market capitalisation in billions of USD1) Apple Alphabet Microsoft Amazon Facebook Tencent Berkshire Hathaway JPMorgan ICBC Johnson&Johnson ExxonMobil Bank of America 0  100  200  300  400  500  600  700  800  1) Market capitalisation at 9 February 2018. Source: Bloomberg  The decline in the labour share can primarily be explained by the fundamental transformation of the global labour market in recent decades. More countries are participating in global trade, labour mobility has increased, and offshoring production 7 Hagelund, K., E. W. Nordbø and L. Sauvik (2017): “Lønnsandelen” [The labour share], Aktuell kommentar 9/2017, Norges Bank (Norwegian only). 8 Source: Financial Times, January 2018 (https://www.ft.com/content/95d16c88-f795-11e7-88f7-5465a6ce1a00). 7  to low-cost countries has become easier.

Also, one of the lessons from the crisis was the need for higher financial literacy and awareness of financial risks, which among other things, required better tailored communication of statistics to different interest groups in society. Thus, in fact pandemics occurred in the midstream of our strivings to address the flaws in statistics revealed during the GFC. At the very beginning of the crisis, the official statistical process was threatened by a basic risk of disruption, so preserving continuity of statistics production was vital. Last year the World Bank conveyed a survey among National Statistical Offices to assess the initial impact of the health crisis on their functionality1. The key findings can be pinned down to several conclusions: 1) around 65% of the offices were fully or partially closed, and face to face data collection was stopped; 2) the ability to collect essential statistics and to meet international data reporting requirements was impacted, particularly in low income countries; 3) approximately two out of three national statistical offices altered their calendar of publication and data dissemination; and very importantly 4) many offices were adapting  1/3  BIS - Central bankers' speeches  and responding to new data needs by changing collection modes, using alternative data sources, adding Covid related questions, as well as reducing content and samples of Surveys. These challenges have been equally relevant for central banks, being one of the pillars of the statistical production systems.
Finally, it may be useful to note that our medium-term projections assume that government expenditures will evolve in line with the official projections and that there will be no further increases in indirect taxes or any administered price adjustments. Any deviation from this assumption may alter the outlook for inflation and monetary policy. Distinguished Guests and Members of the Press, Inflation targets have been breached by a significant margin in the past two years as a result of exceptionally persistent supply shocks, and there is a considerable chance that the shocks are likely to stay for a while. Besides, the ongoing uncertainty resulting from the global economy has been increasing the risks related to the second round effects of these supply shocks. Our revised projections incorporating the latest developments suggest that in 2008 and 2009 inflation is likely to materialize at higher levels than 4 percent. In light of these evaluations, economic agents need reference values in order to establish inflation expectations in the short term. These projections, presented by the Central Bank, are prepared to meet this need. Our projections should be evaluated as the intermediate indicators to be taken as a reference on the way to the 4 percent target. Therefore, we envisage a framework in which inflation forecasts serve as an anchor in the short term, while 4 percent targets continue to be the medium term anchor. The accurate comprehension of this framework by the public, thus mapping out their economic plans accordingly will enhance the efficiency of expectations management.

Figure 1: Annual CPI Inflation and Target Path 12 11 10 9 8 7 6 5 4 3 2 1 0  12/08  09/08  06/08  03/08  12/07  09/07  06/07  03/07  12/06  09/06  06/06  03/06  12/05  Annual CPI Inflation Target Path Uncertainty Band  Source: TURKSTAT, CBT. Prolonged increases in food, energy and commodity prices have recently led to upward pressure on headline inflation and in turn to upward revisions in inflation forecasts in many countries across the world. Turkey is not an exception in this regard, as the deviations of inflation from our forecasts can be mostly attributed to these factors. For instance, our  BIS Review 62/2008  1  forecasts in the October 2006 Inflation Report suggested that inflation would converge to the 4 percent target at the end of the first quarter of 2008. The forecast was based on a scenario in which food inflation moderated to levels comparable with medium term targets and oil prices remained stable at 60 USD per barrel. However, oil prices continued to rise and averaged around 100 USD per barrel in the first quarter of 2008. Moreover, annual food price inflation has continued to remain at elevated levels, reaching 13.4 percent in March. As a consequence, 6.13 percentage points of the 9.15 percent annual CPI inflation in March came from food and energy items (Figure 2).
-  •  These new areas will allow Islamic banks to reduce their exposure to the real estate sector, and to take advantage of the stronger growth potential of the emerging market economies. There are gaps to be filled in structured trade finance and in funding for infrastructural projects as the emerging markets grow, and as global finance consolidates. Third, Islamic finance can also seek to meet the increased demand for simpler and more transparent products and ‘back-to-basics’ finance. Investors are now much more circumspect about complex products and their risks. The crisis taught investors worldwide not only about the damage they can face from the risks that are known and unsurprising, but of the risks of ‘what we do not know’. Islamic finance, with its focus on transparency, price certainty and risk-sharing, can ride this wave of demand for simpler and more basic investments. However, Islamic finance will have to overcome a few important challenges in order to grow its share in global finance and contribute to cross-border finance. These include the need to reduce fragmentation in Islamic finance markets due to differences in accepted standards of Shariah compliance between regions, jurisdictions, and in some cases even domestically within jurisdictions. This has hampered the flow of liquidity between jurisdictions, and is in part why there is yet no Islamic equivalents to the international money and bond markets. There is considerable progress being made to address these challenges.

But with the aim of avoiding international fragmentation, we have to pay special attention and dedicate sufficient efforts then to cross-border interoperability, and hence to wholesale CBDC as a way to ensure it. The second paramount course of action is to reposition the IMF as a pivotal stakeholder, at the very heart of the global financial safety net (GFSN). Today,  Page 9 sur 10 IMF resources account for a smaller share of GFSN resources, but there has already been significant progress: the last general allocation that was carried out in August 2021 amounted to USD 650 billion and was, to quote Kristalina Georgieva, “a shot in the arm for the global economy at a time of unprecedented crisis.” However, developing economies are the primary users of SDRs and yet they have benefited much less from the general allocation: about two-thirds were directed at developed economies, as a result of existing rules. Reallocating SDRs is crucial in these current tense circumstances. The G7 commitment, taken up by the G20, to bring reallocations to USD 100 billion must be kept and implemented efficiently. We are not yet there. Part of these allocations have been allocated to the PRGT Fund to finance low-income countries, including an eventual Food Shock Window. Still, we have to find additional resources to finance the subsidy account of the PRGT.
One such explanation is the low rate of housing construction in recent years, while another is provided by migration to metropolitan areas. The greatest price rises, without comparison, are found precisely in Stockholm, Göteborg and, above all, Malmö. Due to the taxation system and other regulations, we have not experienced the type of market in which households purchase homes as financial investments to then rent them out. It is easier for such markets to develop imbalances and become subject to rapid and heavy price adjustments. However, in the slightly longer term, there is reason to be vigilant. The increase in housing prices and in household debt in relation to income that we have seen over the most recent ten year period is not sustainable in the long term. There is thus a risk that an imbalance of the type I discussed previously will accumulate. At present, we cannot do much about this with monetary policy. We need to have a low interest rate for a longer period of time in order to stimulate the growth needed to help Sweden out of the crisis. At present, it is not the time to counteract imbalances by leaning against the wind. However, should this development become cause for concern, there are other means for making mortgages more expensive for households and thus reducing demand for housing and subduing price development. One such method would be to require greater mortgage repayments. This would increase households’ monthly expenses directly and would thus be an effective means of subduing demand.

Above all, the monetary policy models used must better capture the roles in the economy of credit markets and asset prices, so that the consequences of financial imbalances can be analysed. Not only the price, but also the availability of credit has been discovered to be relevant. However, these assertions do not mean that the present models need to be scrapped. They serve us well in periods in which financial imbalances are not a major problem and intensive work is currently under way around the world to develop these models to better incorporate financial factors. Neither can it be required that the models capture serious financial crises. This would probably require the development of special analytical tools and models. The role of monetary policy must be developed and clarified. Even if improved supervision and regulation enable us to reduce the risk of serious financial imbalances accumulating, monetary policy will still face difficult dilemmas. The financial markets have a remarkable capacity to develop continually and to find ways past regulation. Consequently, we cannot rely on supervision and regulation always succeeding in preventing financial imbalances from arising. In the future, we will certainly continue to see various forms of bubbles, in which asset prices increase in a manner that is not sustainable over the long term, together with a rapid growth in credit. In such cases, the central banks must take a position regarding whether and to which extent monetary policy should consider this phenomenon.