samchain/econo-pairs-v1 huggingface dataset:
During periods of stress there may be large shifts in the demand for reserves and so the Bank’s market operations need to be designed to meet both our monetary policy and financial stability objectives without conflict. In normal times, Bank Rate is set within a reserves averaging framework, in which commercial banks choose their own targets for reserves balances held at the Bank but are then required to meet those targets on average over the monthly maintenance period and are remunerated at Bank Rate. The Bank of England supplies just enough cash to the system so that banks can collectively meet their targets, and a combination of the Operational Standing Facilities and the inter-bank market should guide short-term market interest rates towards Bank Rate. This framework relies on the Bank ensuring the amount of sterling cash in the system is in line with that demanded, given Bank Rate. The liquidity swap structure of the DWF does not involve an extra injection of cash and so helps to avoid any direct impact on the setting of Bank Rate. The Bank may, however, decide in exceptional circumstances, to lend cash instead. That might be required if, for example, the gilt repo market was not functioning properly, or the size of the required draw is sufficiently large that the Bank deemed it unlikely that the counterparty will be able to repo the gilts without causing undue volatility in the markets.

Portfolios of loans can be easier for the Bank to assess from a risk perspective, as they do not embed the complex structures sometimes present in securitised assets. And securitising loans into asset backed securities – such as RMBS – is both complex and expensive for the firms, and generally only available to those large enough to have an existing securitisation programme. The ability to accept raw loan collateral means that smaller counterparties, without securitisation platforms, are not disadvantaged when positioning collateral at the DWF. Since financial instability can start with smaller banks just as easily as larger ones, expanding the universe of possible Discount Window counterparties could lead to significant financial stability benefits. Alongside the expansion of eligible collateral to loan portfolios, we have been encouraging banks to “pre-position” their collateral. Pre-positioning involves the commercial banks identifying, and the Bank of England assessing, various types of collateral ex ante, so that it need not be assessed at short notice in the event of a sudden and unexpected need to borrow at the Discount Window. Assessing varied pools of illiquid collateral can be extremely complex and time consuming. The Bank may not be able to lend much, if at all, against collateral where it has not had time to conduct sufficient due diligence. As a result, it is vital that such collateral is pre-positioned well ahead of any need to draw. One of the benefits from having a more public and transparent facility is that such due diligence is much easier to carry out.
The transformation in the exports profile of Malta, labour market developments, the modus operandi of the banking sector and the prudent management of public finances have been the main determinants of this resilience. The post-EU accession period witnessed a sharp rise in export-oriented services. Liberalisation of various sectors, the higher availability of better educated human resources and a targeted strategy to attract foreign direct investment opened new service sectors. The strong shift of the Maltese economy towards services could in fact explain the rising unit labour costs observed in the past decade. The service sector engages higher quality employees and is less capital intensive than the more traditional parts of the economy. Although this could increase unit labour costs, it does not necessarily imply a loss of competitiveness. The labour content per unit of output is higher in the changed composition of output of the economy. The resilience of the Maltese economy can also be attributed to its banking sector, which operates in a sound and liquid framework and is profitable. The prudent business model adopted by the core domestic banks is the backbone of our financial system’s resilience. 4  BIS central bankers’ speeches  Finally, the prudent management of public finances, and the stable funding of Maltese government debt, have also contributed positively. Around 94% of local sovereign bonds are held by residents, largely with a buy-to-hold mentality. What are the challenges ahead of us? How to strengthen resilience further?

The bank lending survey confirms the improvements in broader credit conditions since the introduction of the APP. As a result, credit to the private sector in the euro area has shown signs of recovery and registered a positive growth since May 2015, the first time in 36 months, as shown in Chart 7. BIS central bankers’ speeches  5  Chart 7 – M3 and main counterparts  On the inflation front, however, results continue to disappoint on the downside. The harmonised index of consumer prices in the euro area is just 0.1% in October 2015, following a period of negative or close-to-zero inflation. On the other hand, the latest inflation rate for Malta, at 1.6%, is within reach of the ECB’s below but close to 2% target; it attests to the buoyancy of the economy. It also indicates that the APP has had positive effects on Malta’s economy. The main transmission channel has worked through the exchange rate. The depreciation of the euro against other major currencies has kept inflation in Malta closer to the ECB target and it also boosted competitiveness on the exports side. Countries with high openness to trade with non-euro area countries have been more sensitive to the depreciation of the euro. In Malta exports of goods towards non-euro area countries represent around 72% of total goods exports and around 87% in the case of service exports. The wealth effect is another transmission channel of the APP that has been evident in Malta.
Evaluation ex post – after the event The most relevant starting point for an evaluation of monetary policy is, as I said earlier, the information and data that was available when the monetary policy decisions were made. That is an ex ante evaluation. However, an ex post analysis may also be relevant. The forecast evaluation that I discussed earlier was, for example, ex post. But an evaluation of monetary policy after the event can also provide valuable insights regarding the monetary policy conducted. The question we should then ask is: given what we know today, what form would a better monetary policy have taken? Would it have been possible with a different monetary policy to achieve a better stabilisation of resource utilisation without undermining the stabilisation of inflation, or vice versa? As this is an analysis in which we know what actually happened and what the results were, it is rather likely that we will discover that this would in fact have been possible. We would then have to get to the bottom of why such a monetary policy was not chosen. Could any of the outcomes have been predicted ex ante? Anyone may of course have luck with a single forecast. But was there another analyst who in a convincing way actually predicted the shocks to the economy that occurred and that the central bank missed? A large part of this analysis will thus concern evaluating and explaining forecast errors – even individual errors – and deviations from the central bank's targets.

It is actually fairer to focus on forecast errors as deviations from targets under a flexible inflation targeting regime may be deliberate on the part of the central bank. Evaluating the central bank's forecasts is thus important; that is investigating whether the forecasts systematically over- or underestimate outcomes and so on. It is also interesting to compare forecast errors for inflation, for the real economy – irrespective of the measure of resource utilisation used – and for the interest rate if the central bank publishes such a  9  10  The output gap in the figures is the output gap in real time. As the output gap is revised backwards when new data is published, the gap in the figures does not correspond to the gap published in, for instance, the Monetary Policy Reports. (10) A preliminary analysis is carried out in Svensson, Lars E. O. (2009), "Transparency under Flexible Inflation Targeting: Experiences and Challenges", www.larseosvensson.net. BIS Review 29/2009  forecast. Which forecast errors are most relevant for explaining why monetary policy, with the benefit of hindsight, could have been better? What were these forecast errors due to? A disadvantage of an ex post evaluation is that we have to wait at least a couple of years for the outcomes for inflation and the real economy for the full impact of the monetary policy measures to become apparent.
Telephone and internet banking is now rapidly expanding, and in 2006, the Saudi Payment System is well poised for further enhancement by SADDAD which provides the ability to pay major companies' bills electronically by debiting the accounts of their customers. This will further enhance efficiency and reduce costs. Currently, SAMA, in cooperation with the banks, is working to upgrade and streamline the Saudi Payments Network to permit the continued expansion in the installation of ATMs and POS. so that it could provide more advanced banking services with high confidentiality and full security. SAMA is also in the process of upgrading the Cheque Clearing System to carry out transactions electronically and in real time. This is in to meet present and future expansion requirements of the growth of the capital market and to promote customer services and to provide same through electronic channels in a way that will cope with the large expansion in the growth of the domestic economy. During the past decade there has been prominent diversification in the banking business which included the following: 1. Banks were able to meet the increasing demand by the different categories of customers for various modern banking services. This made banking services provided in the domestic market compete well with their counterparts in developed countries.

Of course, as I noted in a speech earlier this year, we will have to monitor inflation expectations closely to ensure that they do not become unanchored. We also need to keep a close eye on the degree to which unit labor cost increases in EMEs and real exchange rate appreciation abroad are passed through into U.S. import prices and consumer inflation. Although the historic evidence is that pass-through has been limited in the United States, we cannot be complacent about this. Meanwhile, we have to recognize that monetary policy works somewhat differently in a world in which a large share of global GDP is part of a de facto dollar block. In particular, we must take into account the feedback loops this creates – how U.S. monetary policy influences financial conditions elsewhere and, how these changes, in turn, influence activity and prices in the United States. At the same time, other nations should recognize that we cannot and do not seek to make monetary policy for the world. Responsibility for ensuring that financial conditions in other nations are appropriate for their own circumstances appropriately lies with their national authorities, and they have a wide range of fiscal, monetary, exchange rate and other policy tools available for this purpose. I do not see any fundamental conflict between U.S. domestic economic objectives and the interests of the global system as a whole. But the existing system of global currency and monetary arrangements does render effective pursuit of these objectives more difficult.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London, London, 21 June 2006. *  *  *  My Lord Mayor, Mr Chancellor, My Lords, Aldermen, Mr Recorder, Sheriffs, Ladies and Gentlemen: Chancellor, I know how much store you put on education. So, in the modern spirit of audience participation, let’s see how our City audience matches up to the standards of the past. One hundred years ago, candidates for employment in the Bank of England were required to take an examination. The arithmetic paper contained 16 questions to be completed in three hours. I’m going to give you just two questions and you will have either 15 minutes or the length of my speech, whichever is the shorter and I am in no doubt as to your preference on that, to find the answers. Qu.1: Simplify the expression;  2 1 1 1 ×4 1 − of 1 9 2÷ 3 13 1 5 5 7 +1 − 3 6 8 12 Qu.2: A person invested £ in a 3% Stock at 90. He afterwards sold out at 93 1/2, and invested the proceeds in a 4 1/2 percent Stock at 98. What change was thereby made in his income? Answers can be sent to the Financial Services Authority. No compensation is available if you are incorrectly advised by your neighbour or any other person from the financial sector.

These developments peaked in the 1920, a period of high economic growth in many countries. Stock-market investors as well as consumers looked forward to rising future income. These expectations were broken, however, when the gains from the new technology, instead of leading to rapidly rising corporate profits, accrued mainly to the national economy in the form of a lower price rise and substantial real wage increases. With the global depression in the 1930s, the move towards further integration was checked. A number of decisions to raise tariffs and prohibit international capital movements exacerbated the economic situation. This made the negative consequences for the global economy even more serious and the international economy landed in a deep depression. Developments in this period demonstrated that protectionism and closed doors are not conducive to higher living standards. After World War Two, some minor steps were therefore taken once more towards increased international cooperation. The deregulation of trade began in earnest in the 1950s and financial deregulation started in the 1970s. 1  BIS Review 99/2000  Important breakthroughs in technology followed in their wake. All this heralds another favourable period of rising living standards in the countries that manage to reap the benefits. Turning now to Sweden, there are a number of parallels with developments here in the 19th century. From a poor agrarian society to a wealthy industrial nation In the early 19th century Sweden was still a poor country. Strategic social institutions were in a shaky state.
BIS central bankers’ speeches  7  Similarly, reforms designed to reduce bottlenecks to new investment that come from onerous business conditions should also have mainly benefits in the short-term. This would include measures such as reducing the administrative burden on young firms, or speeding up insolvency proceedings that raise the opportunity cost of investment by tying up capital for years longer than initially assumed. For many euro area countries there are several “low hanging fruit” that can still be picked in this area (Chart 10). The EAGLE simulations show that if reforms are also well coordinated across the euro area, the short-term benefits for a medium-sized country can be further maximised, especially in terms of limiting the downward effects on inflation (Chart 12). This reinforces what I have said about the need for stronger common governance of structural reforms in the euro area: if all countries reform together, then all countries benefit more. And these findings hold even under the assumption that monetary policy is constrained. Interaction with other policy measures But it is also important to underline that this assumption is in fact inaccurate for the euro area today. Contrary to models in the literature, monetary policy is not constrained because we have reached the lower bound. Rather, as I laid out in a recent speech in Washington, I think we have demonstrated in recent months how effective monetary policy can be when it has to resort to unconventional measures.

The reasoning is that reforms implemented at the trough of the cycle or too early in the recovery may increase job insecurity among workers, which may in turn result in a rise in precautionary savings and thereby reduce consumption. Factors such as a  10  Bouis, R., and R. Duval (2011), “Raising the Potential Growth after the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond.” OECD Economics Department Working Papers No. 835, January 2011. 11  Lopez-Garcia, P., F. di Mauro, and the CompNet Task Force (2015), “Assessing European Competitiveness: The new CompNet micro-based database.” ECB Working Paper No.1764. 12  Eggertsson, G., A. Ferrero, and A. Raffo (2014), “Can Structural Reforms Help Europe?” Journal of Monetary Economics, 61, January 2014. BIS central bankers’ speeches  5  depressed housing market would also exacerbate these effects by hindering geographical mobility and the reallocation of resources. 13 There is some empirical foundation to these concerns. For example, research suggests that reforms that increase employment flexibility, such as reducing employment protection, are more likely to depress demand during downturns. 14 I would however reject the conclusion that this means all structural reforms should be postponed. The reason is that the short-term impact of structural reforms does not just depend on when they are implemented, but how – namely, the credibility of reforms, the type of reforms and their interaction with other policy measures.
Next, I shall review recent evidence of contagion phenomena across European sovereigns. The third part of my speech will deal with how the European Central Bank has responded to these developments; and the fourth part with the ultimate key responsibilities pertaining to domestic fiscal authorities in this area and the need for strengthened governance structures. Financial contagion and public policy Since the writings of Walter Bagehot financial contagion has become an issue that is discussed widely in policy, market and academic research circles.2 Taking a broad  1  W. Bagehot (1873), Lombard Street – A Description of the Money Market, pp. 129ff. Emphases by the speaker. 2  See, for example, the following surveys on the issue: G. Kaufman (1994), “Bank contagion: A review of the theory and evidence”, Journal of Financial Services Research, 7; E.P. Davis (1995), Debt, Financial Fragility and Systemic Risk, Clarendon Press, 2nd ed. ; O. de Bandt and P. Hartmann (2000), “Systemic risk: A survey”, ECB Working Paper, no. 35, November; S. Claessens and K. Forbes (eds., 2001), International Financial Contagion, Kluwer Academic Publishers; ECB (2005), “Financial market contagion”, Financial Stability Review, December; ECB (2009), “The concept of systemic risk”, Financial Stability Review,  BIS central bankers’ speeches  1  perspective embracing different views and studies, contagion could be defined as a situation in which instability in a specific financial market, institution or country is transmitted to one or several other markets, institutions or countries.

Given today’s decision, the key rate is at the top of this range equalling from 6% to 7% in nominal terms, or from 2% to 3% in real terms, which is the same, with inflation expected to reach 4%. In this regard, it is of note that the neutral key rate estimate is not ‘a point’, but a range of values. It depends on various domestic and global drivers, as well as the monetary policy transmission mechanism, and may alter, being affected by them. It will therefore take time to ‘feel’ the thresholds of this ‘neutral range’ and make sure that they are in line with our current estimates. If necessary, we will adjust these estimates. A sustainable inflation rate close to the 4% target will be the key criterion suggesting that we are right in our estimates of this range. 3/3  BIS central bankers' speeches
Past experience suggests peoples’ perceptions are sensitive to these macro-economic factors which is why economists sometimes combine the two in a so-called “misery index”.3 (Economics is not called the dismal science for nothing.) If you plot this index over time, and project it into the future using the Bank’s most recent forecasts, two features stand out (Chart 4). First, by the end of this year the misery index will have risen to around 8%, over two percentage points higher than at the start of the year. Economically, this is a significant rise. But, second, in the historical scheme of things this move is nonetheless fairly modest and the level of misery, comparatively-speaking, 3  See Nessen (2008) 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  remains fairly low. The misery index also suggests some wedge has opened up between public perceptions and policymaker expectations for the economy.

By the time Bank Rate had exerted its full influence on the price level, the effect of the shocks was likely to have already dissipated, if not reversed. Second, Bank Rate would have dampened inflation by adding even more downwards pressure on demand on top of the existing recessionary forces. The consequent fall in output and rise in unemployment would have been greater. These two considerations mean that a monetary policy response would most likely have only injected extra volatility to inflation: by the time the price shocks wore off, we would have been facing a severe undershoot of the inflation target and deflation would have been a distinct possibility. The path of output would have been unnecessarily volatile and the deviation of inflation from target might have been different but no more acceptable. The possibility of such shocks, and indeed the ability to respond as we have done, was foreseen when the inflation target regime was conceived. Indeed our Remit from the Government is clear on the consequences. The Remit says that (with my emphasis): “The framework takes into account that any economy at some point can suffer from external events or temporary difficulties, often beyond its control. The framework is based on the recognition that the actual inflation rate will on occasions depart from its target as a result of shocks and  4  The latter would affect CPI directly though its impact on imported consumer goods and services, and indirectly by affecting the cost of domestic production reliant on imported intermediate inputs.