samchain/econo-pairs-v1 huggingface dataset:
We are concerned – as you are – with the health of every sector of the economy, we fully appreciate the interdependence of the different sectors, and we well understand the part that greater real exchange rate stability can play in promoting more balanced economic growth. But the harsh reality is that we could only seek to achieve a particular exchange rate in order to protect the internationally exposed sectors at the risk of destabilising the economy as a whole, and there would – as we have recently seen – be no assurance even so that we would be successful in achieving and maintaining a particular exchange rate. We do, as I say, take full account of the impact of world demand and of the exchange rate on the likely path of inflation, and, to the extent that these influences are exerting a disinflationary effect, interest rates are lower than would otherwise be the case. That was the reality behind the statement made after our last MPC meeting that if the  BIS Review 56/1999  4  exchange rate does not decline from its present high level, as we assume that it will, at least in line with interest rate differentials, then, depending on other developments in the economy, there might need to be further easing of interest rates to keep inflation on track. I stand by that today. But let me be quite clear. This does not mean that we have any particular target for the exchange rate.

If we were to repeat our calculations from 2016, the changes in interest rates alone would have reduced the estimated expected real return from around 3 percent to about 2 percent annually.3 Such estimates are fundamentally uncertain. The actual return may be substantially lower or higher than this estimate, as the history of the GPFG has shown. Even so, this uncertainty is something that we should bear in mind when drafting future central government budgets. 3 Other assumptions underlying the calculation of the GPFG’s expected real return, including an estimated equity risk premium of 3 percentage points, are held constant. 14  CONCLUSION  NORGES BANK  Eleven months ago, Norway had to lock down. At that time, we had no vaccine or medicines that could prevent the illness from spreading. We had to resort to wellknown remedies: Hand disinfectant, soap, hot water and not least – social distancing. Here at Norges Bank, it has not been any different. ECONOMIC PERSPECTIVES 18 FEBRUARY 2021  But times have changed. During the Spanish flu pandemic, Norges Bank decided to dispense a daily dose of cognac to employees who were ill or not feeling very well.
This spurred a surge in household borrowing and private consumption funded by credit. For an extended period the Central Bank’s policy rate hikes primarily impacted the exchange rate and had a more subdued effect on other domestic interest rates, partly because of the glacier bond issues. Fierce competition in the mortgage market between the banks and HFF also undoubtedly delayed the force of the impact that the policy rate increases should have had on mortgage lending rates, including those of the HFF. It should be added that changes in economic aggregates are more difficult to measure in the national accounts during rapid growth episodes, as shown by sizeable revisions to leading preliminary estimates. When the Central Bank raised its policy rate in 2004 and 2005 to counter mounting inflationary pressures, it did so on the basis of available data on macroeconomic conditions that later turned out to give a misleading picture of real developments. Revised statistics published last year showed that the economy expanded by much more in 2004 and 2005 than could be read from data at hand when the Central Bank hiked its policy rate during those two years. When the real outcome was known, it was obvious that the Central Bank should have raised its policy rate by more and faster than it did at the time. Monetary policy faces the challenge that the best available data are always imperfect, but especially so during periods of rapid change.

This was compounded by unforeseen changes in the credit market when banks began offering mortgage loans in competition with the state-owned Housing Financing Fund [HFF], after the latter announced a substantial increase in its loan-to-value ratio and mortgage amounts. Another unexpected event was the issue of króna denominated Eurobonds [glacier bonds], one sideeffect of which was to delay the transmission of the Central Bank’s policy rate hikes across the domestic yield curve. The background to these transactions is a global glut of savings which has led to exceptionally low international interest rates, coinciding with unusually high interest rates in Iceland. One consequence was to divert much of the monetary policy impact into the exchange rate channel. 1  The press release is posted on the Central Bank’s website, www.sedlabank.is  BIS Review 16/2007  1  Another more positive consequence was a surge in turnover in the domestic financial markets, which deepened them by bolstering price formation and enabled them to handle much larger trading volume smoothly, without significant price volatility. Policy rate changes are only passed through in full to domestic demand with a sizeable lag. In a small, open economy like Iceland, the impact is initially reflected in the exchange rate. Other things being equal, a rise in the policy rate causes a temporary appreciation of the króna, which squeezes the export and traded goods sectors and also channels demand out of the economy. The banks’ surprise entrance into the domestic mortgage market made it difficult for the Central Bank to respond effectively.
Williams, J. C. (2014), “Monetary Policy at the Zero Lower Bound: Putting Theory into Practice”, Working paper, Hutchins Center on Fiscal and Monetary Policy at Brookings. Wu, J. C. and F. Xia (2016), “Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound", Journal of Money, Credit, and Banking, 48(2-3), 253–291. 1 I would like to thank Ine Van Robays for her contribution to this speech. I remain solely responsible for the  opinions contained herein. 2 For reviews see Joyce et al. (2012) and Williams (2014). For the euro area, see e.g. Altavilla et al. (2015),  13 / 14  BIS central bankers' speeches  Andrade et al. (2016) and Blattner and Joyce (2016). 3 Rising stock prices might also trigger wealth effects on consumption (see e.g. Modigliani, 1971). 4 See, e.g., Landau and Skudelny (2009). 5 See e.g. Taylor (2000), Campa and Goldberg (2008), Gust et al. (2010), Gopinath et al. (2010), Ahmed et al. (2015), Georgiadis et al. (2017) and di Mauro et al. (2008). 6 See ECB (2016). 7 For more recent work related to the euro area see Comunale and Kunovac (2017). 8 Exogenous shocks are often associated with changes in the risk premium (see e.g. Engel and West, 2010). 9 See e.g. Hahn (2007) and Osbat and Wagner (2006). 10 See e.g. Cœuré (2017) and Draghi (2017). 11 Phillips curve estimates are often partial equilibrium in nature, building on single equation specifications.

I want to talk about three big themes: •  MREL and TLAC: how far are they the same or different? •  The relationship between the regulation of banks’ liability structures via TLAC and MREL and resolution planning. •  And why, if we are preparing firm specific resolution plans, have a TLAC standard at all? Starting with MREL and TLAC, much has been made of the differences between them. Let me set these out in turn: •  TLAC sets a global standard for G-SIBs 1 while MREL is for all EU banks and investment firms. •  TLAC describes a Pillar 1 minimum requirement, while MREL is set by the resolution authority, bank by bank on the basis of a resolution plan. •  The TLAC requirement is set in terms of risk weighted assets (RWAs) and leverage while MREL is formally set in relation to total liabilities and own funds. •  The FSB consultation specifies the quantum and quality of TLAC a G-SIB requires and sets out how TLAC should be distributed within groups. While BRRD provides for more flexibility, certainly on whether liabilities need to be subordinated to count as MREL. So much for the differences. But both are founded on the same principles and in the Key Attributes have the same DNA. Both are designed to achieve the twin objectives of: •  1  Maintaining critical economic functions in the event of failure; and  Global systemically important banks.
On the contrary, they should assert their ascendancy over it through strict financial management. 2. Finance should not dominate the economy, it should serve it. i)  Reasserting the importance of regulation and supervision:  BIS central bankers’ speeches  1  •  The period from the 1990s to the start of the 2000s is sometimes called “The Great Moderation” because inflation remained stable at moderate levels and growth appeared solid and sustainable. In reality, however, the period saw frequent buildups of financial excesses. These excesses led to the crisis, and they were firmly rooted in the dogma of self-regulation – a dogma which was itself fostered by the belief that financial markets were somehow sacred and inherently “efficient”, capable of setting “real” prices. •  The crisis completely discredited this theory. From the first sparks of turmoil, the lack of transparency in certain segments of the market – notably CDOs – significantly exacerbated the loss of confidence. Financial institutions had insufficient capital cushions to absorb the shocks, leading to bankruptcies and forcing the government to bail them out, a process that was extremely costly for public finances, but also very damaging to financial sector accountability, as at times it meant bank losses were “socialised” whereas previously their profits had been “privatised”. This is the problem of moral hazard, a subject which will no doubt come up over the course of this session.

•  More specifically, the new regulations were guided by five main objectives: i)  To increase the resilience of the banking sector (solvency and liquidity ratios);  ii)  To prevent excessive leverage and maturity transformation (leverage and net stable funding ratios);  iii)  To reduce market risk and increase market transparency (reform of over-thecounter derivatives, Basel 2.5 on market risk);  iv)  To limit systemic risks (macroprudential rules, identification of and specific rules for systemic institutions, rules for bank resolution);  iv)  To fight “casino finance” (rules on the separation of certain speculative banking activities). •  Throughout the preparation of the new regulations, the idea was never to suffocate banks with overly restrictive rules. The regulators tried to calibrate the rules in a balanced manner, and took into account the reality of the situations these banks face – and the risk that, rather than limiting dangerous banking activities, the rules might in fact drive banks to shift them into unregulated entities. France, in particular,  2  BIS central bankers’ speeches  worked hard to make sure that the “pendulum theory” did not mean regulation was set at a level that would prevent banks from continuing to finance the economy. I’m thinking of two examples in particular: the improvement of the liquidity coverage ratio (LCR) at the start of the year and the balanced choices made by both French and German political authorities on the separation of banking activities.
Tarisa Watanagase: Inflation targeting – a reflection on Thailand’s experience Opening remarks by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Bank of Thailand’s International Symposium on “Challenges to Inflation Targeting in Emerging Market Countries,” Bangkok, 13 November 2006. *  *  *  Honorable Guests, Distinguished Participants, Ladies and Gentlemen, First, I would like to extend a very warm welcome to all of you here today. This is the second time that the Bank of Thailand organizes a symposium at an international level. Our first international symposium, “Practical Experiences on Inflation Targeting,” was held in October 2000, a few months after we had adopted inflation targeting as a new monetary policy framework for Thailand. But this symposium today is the first one that brings together central bank governors, senior central bank executives, world-renowned academics and policy experts from leading international organizations. Many of you have extremely tight schedules and some have to travel a very long distance. I would like to express our great appreciation for your presence and very much hope that what we will learn together in this symposium is beneficial to all of us. Ladies and Gentlemen, Thailand formally adopted inflation targeting as a monetary policy framework on May 23, 2000. The change in policy regime was a result of our search for an appropriate nominal anchor after the floating of the Thai baht in July 1997. In the interim period, we used monetary aggregates as our policy target.

Non-energy industrial goods inflation fell to 6.2 per cent in April, from 6.6 per cent in March, when it declined for the first time in several months. But services inflation increased to 5.2 per cent in April, from 5.1 per cent in March. Inflation is still being pushed up by the gradual pass-through of past energy cost increases and supply bottlenecks. In services, especially, it is still being pushed higher also by pent-up demand from the reopening of the economy and by rising wages. The information available up to March suggests that indicators of underlying inflation remain high. Wage pressures have strengthened further as employees, in a context of a robust labour market, recoup some of the purchasing power they have lost as a result of high inflation. Moreover, in some sectors firms have been able to increase their profit margins on the back of mismatches between supply and demand and the uncertainty created by high and volatile inflation. Although most measures of longer-term inflation expectations currently stand at around two per cent, some indicators have edged up and warrant continued monitoring. Risk assessment Renewed financial market tensions, if persistent, would pose a downside risk to the outlook for growth as they could tighten broader credit conditions more strongly than  2/4  BIS - Central bankers' speeches  expected and dampen confidence. Russia's war against Ukraine also continues to be a significant downside risk to the economy.
Stefan Ingves: Introduction on monetary policy Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Riksdag Commitee on Finance, Stockholm, 15 November 2007. *  *  *  What is the objective of the Riksbank’s monetary policy? To maintain price stability – an inflation rate around two per cent a year? Yes, this is of course correct. But behind this wording there lies a deeper meaning – the actual core of the task delegated by the Riksdag (the Swedish parliament) and ultimately the Swedish people to the Riksbank. Because what it is essentially all about is to create the best possible conditions for good and sustainable economic development. And monetary policy contributes to this by keeping inflation low and stable. The inflation target is not merely a target, but also a means. The fact that I as Governor of the Riksbank have the opportunity to discuss monetary policy with you who represent the Riksdag is also important for the prospects of reaching this goal in the best possible way. The Riksbank must have support and legitimacy from the people to be able to succeed in its policy. It must therefore be easy to examine how monetary policy is conducted and how well we live up to our principles. The fact that the Riksbank Governor regularly takes part in these hearings is an important part of this process. Our task also means that we must constantly strive to become better at what we do and develop our working methods.

And this is definitely something the general public can require of us in our role as independent authority. All of these changes are steps in that direction. Steps we have taken to become clearer and more open – to become more efficient in our way of communicating. I would also like to point out that much of what we have done is in line with questions discussed here in the Committee on Finance. This emphasises the importance of using debate and dialogue to reach new solutions. We essentially all want the same thing – to create in the best way possible the right conditions for good and sustainable economic growth. Other changes The Committee on Finance itself has also initiated several changes that contribute to good discussions on monetary policy (slide 4). One change I am thinking of is the fact that the hearing with the Governor of the Riksbank now takes place a couple of weeks after the Monetary Policy Report has been published and that experts can be called in to assist the Committee, if necessary. Of course, it means I have to answer more difficult questions the more time you have had to prepare yourselves. But this is how it should be and something positive for all parties. I would also like to mention another new element – a change of name which was largely initiated by the Committee on Finance. I am referring to the measure of underlying inflation calculated as CPI adjusted for households’ mortgage interest expenditure.
Final remarks on the current juncture We are currently enduring an international financial crisis that has no precedent in recent decades. How the world economic situation will unfold and for how long the recession will last is yet to be seen. Nonetheless, some reflections may be helpful at this point about the abilities of our economy to deal with the turbulences, in a scenario where our inflation rates are still very high and have to be brought down. One feature that stands out in solid economies is that they learn from their mistakes, and hopefully the world will come out of this episode as a strengthened international economy. In our country, we learned the lesson. The financial crisis of 1982 endowed us with a General Banking Act that has been perfected over time, and which establishes a framework that allows the existence of a dynamic banking industry together with good prudential regulation. The excesses of the US banking system could not have happened in Chile. Hence, the realestate bubble driven by fast and unhealthy credit expansion would hardly have formed in our country. In the first place, mortgage loans in Chile are different from those in the United States. There, these loans are issued “without recourse”, which allows the bank only to repossess the mortgaged property, but not other goods belonging to the debtor to recover the loan, as is the case in Chile.

They mean that in thinking about ways to mitigate systemic risk it is not tenable to focus simply on bank-centered financial institutions, and it is not feasible to achieve change through national approaches applied only to the institutions of the home country. For these reasons, where we see a need to induce a broader change in market practice, a broader range of informal mechanisms of cooperation among supervisors, among market participants and involving supervisors and market participants would be useful. The second generation of the Counterparty Risk Management Policy Group, led by Jerry Corrigan, is one example of a market-led initiative to define a set of common challenges and recommendations for  4  BIS Review 14/2006  change. Supervisors in the major financial centers are following progress against those recommendations closely. The effort to improve the post trade processing infrastructure for over-the-counter derivatives is an example of regulatory cooperation to help address a collective action problem among market participants, with some encouraging initial results. In this effort, the 14 major dealers along with almost as many supervisors and market regulators from the United States and other major countries, met at the New York Fed in September 2005. We outlined our concerns and asked the dealers to give us a plan for how to fix the problem. They came up with a credible plan, with a set of outcomes-based targets, and agreed to report progress on a common set of metrics.
3  Indeed the Treasury’s 2009 Budget forecast applied a downward adjustment to the trend level of output of around 5% between mid2007 and mid-2010, which was within the range of external estimates of the impact of the global credit shock on medium-term potential output. 4 Haldane (2017) 5 See also Tenreyro (2018) 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Three other sectors – communications, professional & scientific services, and real estate – almost fully account for the remainder of the growth puzzle. Of course there are limitations to pre-crisis comparisons. The finance sector is a good example. Increased leverage and risk-taking with financial firms prior to the crisis is likely to have boosted measured productivity, beyond what was sustainable. Third, both slow growth in capital per hour worked (known as capital deepening) and the efficiency with which companies put their labour and capital inputs to use (known as total factor productivity) have contributed to weak growth in roughly equal measure. While the weakness in total factor productivity growth has been concentrated in manufacturing and finance, the weakness in capital deepening has been more widespread across sectors. In other words, whatever is driving slower capital deepening is likely to be more widespread across the economy. General uncertainty is one likely candidate, and may have been more of a feature in the UK than elsewhere, particularly in the period since the Euro area crisis.

Some central banks are presently undergoing the process of shaping and consolidating their  BIS central bankers’ speeches  5  governance, an endeavor intended to transform them into modern monetary authorities. And, believe me, I know from experience how complicated such a process can be! In the early nineties, when I took over as Governor of the National Bank of Romania, a tremendous effort was needed to put into practice the transition from a monobank-type system to a two-tier system. It was by no means a simple task to reform an institution that had operated in the context of centralised planning of the entire economic activity and to separate commercial banking operations from central bank operations, which remained the responsibility of the NBR. The new NBR only counted less than 5 percent of the former central bank employees, most of them in the cash management and accounting units! Therefore, we had to build from scratch several departments that are key to the functioning of a modern central bank, such as monetary policy, economic research, banking supervision and regulation... Fortunately, the NBR was given a helping hand in improving its governance structure when it needed it the most. Just to give two examples, banking supervision was set up at the NBR with the extremely useful support of De Nederlandsche Bank and the forex market was put in place with the assistance from the central bank of Belgium. We are extremely grateful to both institutions for their generous support.