samchain/econo-pairs-v1 huggingface dataset:
That is a legacy of what we had to do before, and what we learned along the way: Croatian banks have an average CAR of approximately 24%, My preferred measure of bank capitalization – leverage ratio, 12%, LCR is approximately 240%, C/I ratio 47% and the latest ROE 14% And banks are still lending almost as there was no tightening. Another lesson that we clearly learned is that well capitalized banks lend more than poorly capitalized ones. 4. However, in the last six months, we have also learned that the euro area is to a significant degree still a fragmented market in which we also risk negative spillovers. Therefore, we should do as much as possible to make it a smooth, functional single money and banking market. Otherwise, we have a different transmission of monetary policy and potentially different resolution issues, which can create political tensions and reduce degrees of freedom for optimal policymaking. In other to achieve that, completing the banking union is necessary, and so is making sure that the SRB is operationally capable of resolving banks in a timely manner in a similar way, and similar cost structure across the whole banking union. Aligning the national regulations across different countries is necessary in many areas. And, of course, breaking the national banks / national public debt nexus is as necessary as it ever was. All of that is not easy and requires a lot of work on all sides.

8  BIS Review 103/2009  Figure 13: Interest Rate Developments (Percent) M a r k e t In te r e s t R a te s  26  P o lic y R a te s  24 22 20 18 16 14 12 10  0609  0409  0209  1208  1008  0808  0608  0408  0208  1207  1007  8  Source: ISE, CBRT. Figure 14: Medium-Term Real Interest Rates from the Yield on Government Securities* (Percent) 17 15 13 11 9 7  0709  0609  0509  0409  0309  0209  0109  1208  1108  1008  0908  0808  0708  0608  0508  0408  0308  0208  0108  1207  5  * 2-year real interest rates, calculated using 2-year nominal interest rates from the yield curve and inflation expectations from the CBRT’s Expectations Survey. Source: ISE, CBRT. However, the Central Bank considers that market interest rates do not properly reflect the current stance of the monetary policy and statements, and that yield curves should be more horizontal compared to the current situation (Figure 15). In this regard, the proper monitoring and correct understanding of the monetary policy perspective by economic agents, which I will now go on to explain, bears great significance.
Since then, positive demand news has lifted the starting level of UK output. If this level was maintained along the same growth trajectory, the average output gap over the next three years would be 3 percentage points smaller than in May. With a Phillips curve slope of a third, inflation at years 2 and 3 would be around 1 percentage point higher than expected in May. Another significant piece of news since May has been in asset prices. Since then, shorter-term interest rates have fallen by around 25 basis points, risky asset prices such as equities have risen by almost 7% and the sterling exchange rate has fallen by around 2¼%. Taken together, these asset prices movements represent a material loosening in UK monetary conditions. On standard ready-reckoners, they would boost output by around ½%, and inflation by around 0.2 percentage points, at the policy horizon relative to the May scenario. Finally, imagine we plugged this news about the expected output gap and inflation into a standard Taylor Rule, in which interest rates are mechanically set in line with these two factors. Assuming weights on the 22  All speeches are available online at www.bankofengland.co.uk/speeches  22  two terms of 0.5 and 1.5 respectively, the Taylor Rule implied path of interest rates would, on average, be around 1 percentage point higher over the policy horizon as a result of the news about asset prices and demand, relative to the May-implied scenario path.

There is a negative correlation, suggesting it might be difficult for the sectors which absorbed most workers pre-Covid to repeat this feat post-Covid. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Chart 14: Falls in output by sector against post-GFC employment growth Covid-19 sectoral output hits, % 40 20  Contribution to post-GFC employment growth, pp  0 -20 -40 -60 Accommodation & food  -80 -100 -1  0  1  2  3  Sources: ONS and Bank calculations. Notes: Sectoral output hits on y-axis are from Chart 2. Numbers on x-axis are the percentage point contribution of each sector to total growth in UK employment from its post-global financial crisis trough to end-2019. Other, structural, factors may further complicate the labour market picture. The Covid crisis has shifted relative prices in ways which could encourage companies to invest in machines rather than people during the recovery. The price of capital goods has fallen while the price of labour has increased because of the need for Covid-secure premises and practices. This shift in the relative price of capital versus labour will provide a headwind to the re-absorption of workers. A second structural headwind concerns the skills mix of those losing their jobs. Research suggests this is likely to be skewed towards those with fewest skills and least experience, especially the young. The Resolution Foundation estimates that high unemployment will result in a 13% lower probability of a new graduate being in employment three years after completing education.
The presence of the Housing Finance Fund in the mortgage market and its state guarantee distorted the market and hindered policy rate increases from being reflected in mortgage rates. Moreover, the Central Bank was not able to sufficiently affect expectations in the market with its decisions and pronouncements. This significantly changed in early 2007 when the Bank began, like the Central Banks of Norway and Sweden for example, to publish a future policy rate path. That change greatly improved the communication and transparency of monetary policy and significantly strengthened the transmission mechanism as policy rate decisions were much more effectively reflected through the maturity spectrum. The Treasury has delivered surpluses over a number of years. They and the privatization proceeds from earlier years were used to retire debt, leaving the Treasury currently without debt in net terms. In fact, the Treasury earned net interest income in 2007. Its deposits in the Central Bank are currently equivalent to roughly 12% of GDP. Nevertheless, it is evident from developments over the last few years that fiscal policy was not sufficiently tight to aid monetary policy in containing inflation. Domestic demand has been slow in responding to tightened monetary policy. The higher policy rate meant that the Icelandic króna became an attractive investment vehicle for foreign investors. International issuance of Icelandic krónur bonds commenced in 2005 with relatively lively issue activity – albeit fluctuating – into the early part of this year. It followed a pattern very similar to that experienced by New Zealand.

As a counter-example, in 2008 Google launched a predictive model of flu outbreaks based on searches for phrases such as “indications of flu”. 10  This did a terrific job of tracking flu outbreaks in the US in 2009-10. 11  But that model’s predictions broke down spectacularly in the following years. That empirical fragility arose, I  would suggest, from an over-reliance on empirical regularities and an over-adherence to inductive methods. Or, put differently, from too little focus being placed on the deep medical causes of past flu outbreaks. In the first case, empirical fragility arose from too tight a set of axioms and restrictions, from placing too great an emphasis on theory over real-world correlations and historical experience. In the second, empirical 5  Haldane (2016). Popper (1934) and Popper (1959). Bacon (1620). 8 Anderson (2008). 9 For example, Stiglitz (2018). 10 Ginsberg et al (2009). 11 Lazer et al (2014). 6 7  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  fragility arose from too loose a set of axioms and restrictions, from observed empirical correlations being given too great a role relative to theory and causality. In both cases, these mistakes might have been reduced had inductive and deductive approaches been used in a complementary, or iterative, fashion. This iterative approach has a strong pedigree in other disciplines.
And unemployment is close to its lowest level for a quarter of a century. In my opinion, that has not happened by chance, but is the result of a range of policies. Achieving low and stable inflation is the best contribution that monetary policy can make to the wider economic goals of sustainable growth and employment. Having an inflation target certainly does not mean that we take no interest in real  BIS Review 87/2001  1  activity. We have discretion over how rapidly we try to bring inflation back to target when and if it diverges from 2½%. And we regularly publish our best guess about the likely future path of growth up to a two year horizon. But the aim of policy is clear - we do what is necessary to keep inflation on target. So far, I have spoken as if monetary policy is carried out by faceless bureaucrats hidden deep within the vaults of Threadneedle Street. Of course, as any of you who read the Diary columns regularly will know, nothing could be further from the truth! There are nine of us on the Bank's Monetary Policy Committee, and we meet once a month to make our interest rate decision. This is a rigorous process, and rightly so. The first stage occurs on the Friday before the policy meeting, with a briefing by Bank staff on all of the data that have been released over the previous month.

At the very least, firms and households are likely to delay major expenditure decisions until things become clearer. And this may act as a drag on the recovery in activity. The rise in the cost of security and insurance will also probably have a more long-lasting effect on activity. Discussion of the attacks has somewhat obscured the fact that the world economy seemed to be slowing more rapidly than expected even before 11 September. Overall activity in the US had been weak, despite continued strength in some sectors, notably retail. And the euro area grew by just 0.1% in the second quarter, as net trade slowed sharply. The monetary policy reaction has of course been rapid. In the United States, in particular, interest rates have already been reduced by four percentage points since the start of the year. And fiscal policy has been expanded. These actions should clearly stimulate demand. But, as is always the case, the size and timing of these effects is extremely hard to judge. 2  BIS Review 87/2001  So far this year, the UK economy has fared rather better than its main trading partners. GDP growth has slowed from the peaks it reached during 2000. But the economy still grew by 0.6% in the first quarter of this year, and 0.4% in the second. Much of that strength, of course, reflects domestic demand growth, and particularly household consumption, which rose a further 1.3% in Q2. In many ways, this should not be a surprise.
And it seems somewhat inconsistent with the rise in equity and other asset prices, the fall in credit risk premia, and the relatively low levels of uncertainty about the future reflected in measures of expected future volatility in many different types of financial instruments. One feature of present conditions that is not captured by these explanations and that is likely to be playing a significant role in contributing to the combination of these large imbalances and relatively low forward interest rates is the pattern of exchange rate and monetary policy arrangements in the global economy today. Even with the broad shift globally to more flexible exchange rates, a substantial part of the world economy now run monetary policy regimes targeted at limiting the variability in their exchange rate against the dollar, or a basket in which the dollar plays a substantial role. Sustaining that objective in the past several years has required a large accumulation of dollar assets. The scale of this activity has been particularly dramatic in parts of Asia. The significant rise in the earnings of the energy exporters, many of whom also run exchange rate regimes that seek to shadow the dollar, has also generated a substantial rise in investments in U.S. assets. A large share of the capital flows to the United States that have financed our current account imbalance come from these official sources. These flows add to other sources of private demand for U.S. assets.

Many of these implications are positive, for the benefits of integration over time are powerful and compelling for all economies. In important ways, economic integration may have made the principal job of central banks easier, by contributing to productivity growth and reducing some sources of inflation pressure, at least during the transition when a large share of the working age population of the world is being brought into the market. But the process of change in how economies and financial markets interact also complicates the task of central banks. Our understanding of the how these changes affect our capacity to forecast economic activity and inflation and our ability to assess how monetary policy affects the economy almost certainly lags the changes underway. In my remarks today, I will talk about some of the implications of these challenges for the conduct of monetary policy. I will focus on two features of what is happening in the world economy and financial markets today that are among the most interesting and consequential of the many questions we face today in thinking about the changes in the world economy and the task of central banking. These are, first, the behavior of forward interest rates in financial markets, and, second, the pattern of external imbalances. These features are interesting, in part, because they seem somewhat anomalous, or inconsistent with what the past has led us to expect. They seem likely to be related to each other and both are a feature of the changes underway in global financial integration.
But there is no more important challenge than keeping inflation and inflation expectations anchored on the target. I have enjoyed the opportunity to look back over the past ten years, but, as the saying continues, the only meeting that matters is the next one. When Eddie George and I sat in the Governor’s office on that sunny Bank Holiday morning in 1997, we knew we had been given an opportunity to change monetary policy for the better. We had to grab it with both hands. That is exactly what the Bank has done. References Blinder, A S (2004), The Quiet Revolution: Central Banking Goes Modern, Yale University Press. Blinder, A S and Morgan, R (2000), “Are two heads better than one? An experimental analysis of group vs individual decision making”, NBER working paper no 7909, September. Goldman Sachs Economic Research (2006), “Should the MPC Have Pre-Announced the Hike?”, UK Economics Analyst, 6, 9. Goodhart, C A E (2007), “Whatever Became of the Monetary Aggregates?”, Peston Lecture at Queen Mary College, London. Hennessy, P (2007), Having It So Good: Britain in the Fifties, Penguin. King, M A (2002a), “The Monetary Policy Committee Five Years On”, Speech to the Society of Business Economists, Bank of England Quarterly Bulletin, Summer 2002. King, M A (2002b), “No Money, No Inflation: The Role of Money in the Economy”, Bank of England Quarterly Bulletin, Summer 2002. King, M A (2004), “Speech at the Eden Project, Cornwall”, http://www.bankofengland.co.uk/publications/speeches/2004/speech229.pdf.

And it is never easy to distinguish between demand and supply shocks to money. But that is true for shocks to many economic variables and is no reason to assume that money supply shocks are simply absent. When we look at output data, we routinely ask ourselves the question: is it a demand shock or is it a supply shock? We do not rely on the simple correlation in the past between output and inflation. It was important for the Federal Reserve to identify output movements in the late 1990s as the result of a supply (productivity) shock rather than an increase in demand. The challenge is to carry this level of interrogation and questioning of the data to our analysis of money and credit. We are trying to develop models that help us to distinguish between demand and supply shocks to money and we shall be devoting more resources to this task, including our new Credit Conditions Survey. (b)  What we say: central bank communications  In recent years, a great deal has been written about how and why central banks communicate with financial markets and the public more generally. Communications are crucial to a central bank’s ability to anchor inflation expectations. Only two questions really matter. What are central banks trying to communicate and to whom? The first task for a central bank is to communicate the case for price stability in a simple and straightforward way to as wide an audience as possible.
Subdued inflation expectations and restrained wage demands pointed in the same direction. In view of a weak development of international activity, it was foreseen that full capacity utilisation in the Swedish economy would not be reached until the end of the forecast period, when inflation was assumed to be marginally above the target. This called for a readiness to undertake some cautious tightening of the monetary stance later in the year. At the same time, the spectrum of risks had shifted, with less risk of inflation exceeding its expected path but a continued risk of development being weaker than in the main scenario. In view of the uncertainty, the Riksbank chose to await future developments. •  BIS Review 81/1998  At the beginning of the summer we observed that inflation was following a lower path than we had assumed in the main scenario in March. Weaker import prices were contributing to this but so were other factors. Transitory effects - lower interest rates and changes in indirect taxes and subsidies - were particularly prominent. Moreover, on account of lower wage increases and stronger productivity growth than expected earlier, it seemed that inflation in the longer run would be somewhat lower than the Riksbank had predicted. With the outlook for productivity, it was likely that some surplus capacity would continue to exist during the whole period. -3All in all, inflation prospects one to two years ahead were accordingly more subdued than before and predicted inflation was below the target throughout the forecast period.

I also believe that the question of the general nature of the ECB’s monetary and exchange rate policies in pursuit of price stability, sustainable growth and low unemployment is of concern not just for those 11 countries. Since the ECB’s policies will have global effects, they are of global concern. As you all know, the general outlines of the monetary policies to be pursued by the 11 countries whose currencies are tied to the euro have already been determined. This has also created some new problems. But before discussing them, I would like to point out the four main characteristics of the ECB. First, it is independent. This independence means that it can decide on what monetary policy strategies to follow and what monetary instruments, especially short-term interest rates, to use in pursuit of its primary objective of maintaining price stability. BIS Review 1/1999  –2–  The ECB’s Governing Council, consisting of the governors of the national central banks of the euro area and the ECB’s Executive Board, will determine the basic outlines of the ECB’s monetary policy. The chosen strategy will be carried out by the ECB’s Executive Board, consisting of a governor, vice governor and four members appointed by the president or prime minister of countries in the European Monetary System. From the independence of the central bank governors on the Governing Council, one can infer a high degree of independence for the system.
We are already clear that we stand ready to act as settlement agent both for regulated systemically important schemes supervised by the Bank, and, on a case-by-case basis, for other new systems. 9 The Bank will use this to enable innovation and competition, without compromising stability. The third way the Bank is enabling the FinTech transformation is by exploring the use of Distributed Ledger (DL) technology in our core activities, including the operation of RTGS. If distributed ledger technology could provide a more efficient way for private sector firms to deliver payments and settle securities, why not apply it to the core of the payments system itself? The great promise of distributed ledgers for central banks is their potential to enhance resilience. Distributing the ledger means multiple copies of the system. It can continue to operate if parts get knocked out. That removes the single point of failure risk inherent in a centralised system. But if we are to entrust the heart of our financial system to such technology, it must be robust and reliable. The payments system we oversee processes £ trillion of bank transactions, equivalent to around 1/3 of annual GDP, each day. Disruptions are potentially costly. That is why, in payments and settlement, the Bank has an extremely low tolerance for any threat to the integrity of the economy’s ‘plumbing’. We won’t beta test RTGS. To help distinguish DL’s potential from its hype, the Bank has set up our own as a Proof of Concept.

Through its actions, it will continue to uphold the trust which has been placed in it thus far. 4  BIS Review 71/2007