samchain/econo-pairs-v1 huggingface dataset:
So the Committee also publishes a forecast conditioned on market interest rates, in order to provide a guide as to how the forecast depends upon the profile of short-term interest rates. The Committee has had more problems in trying to explain that there is no mechanical link between the central projection of the forecast for inflation two years ahead and the policy decision. This is for several reasons. First, the view of inflation both prior to and after the two-year horizon is important too. The optimal horizon over which to bring inflation back to target depends on the shock which moved inflation above or below target. Second, the risks to inflation around the central projection (defined as the mode of the distribution of inflation at future points) are also relevant to the policy decision. Third, there may be some risks to which the Committee does not wish to respond until they have materialised. But the Committee will continue to explain how its outlook for inflation relates to the policy decision, and, over time, we hope that this educational effort will pay off. Finally, there have been several miscellaneous suggestions for change to the MPC. First, the MPC has been accused of meeting too frequently and, as a result, changing rates too often. The EEF report suggested that the Committee meet only eight times a year, as does the Federal Reserve, because “meeting once a month could lead a central bank into changing interest rates too often in response to potentially misleading monthly data”.

For the remaining five external members, the propensity to be in the minority has been very similar to the Bank executive (excluding the Governor), with dissenting as a proportion of total votes at 12% and 11% respectively. Moreover the differences in votes have been small. On only four occasions has the difference between the highest and lowest interest rate voted for exceeded 25 basis points, and, interestingly, all four were between August 1998 and April 1999, a period of great uncertainty about whether there would be a downturn in the world economy that did not in fact materialise. Since then differences of view have 5  4  Hall (1971), “Decisions, decisions, decisions”, Psychology Today, November. BIS Review 34/2002  never exceeded 25 basis points. The average difference between the interest rate cast by the member voting for the highest average level of rates and the member voting for the lowest average level of rates is less than 15 basis points! Such a small difference hardly corresponds to a major difference of view about the outlook for inflation. 3. Third, has the Committee explained clearly the reasons for its decisions? Transparency has been at the centre of the monetary policy framework since 1992 when it was recognised that clear explanations of policy would help to anchor inflation expectations on the target. The first major step in enhancing transparency was the Bank’s Inflation Report, which first appeared in February 1993, and was subsequently enhanced by publication of the minutes of the meetings between the Chancellor and Governor.
Furthermore, greater transparency in the information provided by banks on their balance-sheet and risk position must help alleviate the informational asymmetries among shareholders, lenders and borrowers that arguably lie behind most episodes of financial distress. Yet despite the recent advances in the design of a banking supranational prudential framework, much remains to be done, especially with regard to other financial institutions and markets. From my personal experience as governor of a central bank with supervisory and regulatory responsibilities, member of the Governing Council of the European Central Bank (ECB) and member of the Basel Committee on Banking Supervision, I strongly believe that there is much merit in central banks playing an active role in the pursuit of prudential policies that rightly respond to the challenges posed by the current process of intense financial deepening. I would agree that one specific institutional model is unlikely to fit all. Moreover, the operational separation between prudential and monetary policies should in any event be preserved. However, it is in the general interest of societies to take advantage of the institutional strength and the valuable information and analytical expertise held by most central banks in order to safeguard the soundness of financial systems. Reflections on challenges in EMU The challenges faced by a central bank are certainly not smaller if it has to conduct a single monetary policy for a multinational currency area. We have seen that in the new economic and financial landscape, central banks should explore ways to fully internalise the close links between financial and macroeconomic stability.

This pragmatic view is consistent with the idea that monetary policy decisions should be based not only on the most likely scenarios but also on other, less probable ones which, however, may have far-reaching implications  2  BIS Review 53/2006  for the entire system should they materialise. Certainly, an abrupt asset price correction pertains to this class of low-probability event that may ultimately entail significant costs for a country’s welfare. More importantly, to place this approach to monetary policy in its right place, it is critical to recognise that some of the risks inherent in the financial sphere should first be the subject of an appropriate prudential framework. It is no exaggeration to say that any concern about unbalanced market developments is, at core, a concern about a problem of inappropriate risk management. This statement applies to the case in which, due to over-optimism or short-sighted behaviour, market participants fail to appreciate the true risk of their investment or lending strategies. Yet even if their behaviour can be thought as being fully rational from an individual perspective, nothing ensures that the final outcome will not convey important risks at a systemic level that are not properly internalised by single agents. As a result, a portion of the marked volatility and procyclicality of some key financial variables, like asset prices and credit, may be understood as a reflection of individual and collective risk misjudgement.
Mutual fund purchases of debt and equity have become an important source of finance for emerging markets. Since end-2009, mutual funds accounted for on average 5% of non-bank portfolio debt flows to advanced economies but more than one-fifth of those to emerging markets. And mutual fund flows to emerging markets seem particularly prone to abrupt stops (Chart 7). Intuitively, market-based finance makes domestic bank-focussed macroprudential policies less effective. Raising the countercyclical capital buffer for banks does little to reduce risks from, or build resilience in, the provision-of market based finance. Moreover, it can induce regulatory leakage as credit migrates to the market-based finance sector. 14  The measure of volatility used is the standard deviation of flows relative to the long-term mean of the respective flows – the coefficient of variation. This controls for the relatively smaller role that portfolio flows have historically played in emerging market financing relative to bank flows. 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  Chart 8, which is based on a similar illustrative model and calibration to the one I discussed earlier, 15  demonstrates this point . It shows the tradeoff available to a domestic policymaker whose only tool, the countercyclical capital buffer, is bank-focussed.

Furthermore, those that voted against the single currency may have been strengthened in their belief by the fact that the ‘no’ vote was not followed by any speculation against the krona, which instead has appreciated against both the euro and the dollar since the referendum. What didn’t feature in the same way in the debate was the longer-term perspective - and it is this perspective that I believe speaks in favour of the euro. It proved difficult to explain that the underlying causes of the crisis in Germany and France were mainly domestic structural problems, partly in the labour market. Those problems had existed long before EMU and could not be remedied by a separate currency and monetary policy. At the same time, the economic slowdown overshadowed the long-term transaction gains of a single currency for trade and the financial markets. In earlier economic research, the gains associated with a single currency were often viewed as uncertain and very small at best. As there were very few contemporary examples of currency unions, comparisons were made instead between fixed and floating exchange rates, in which fixed exchange rates did not appear to result in any definite welfare gains. More recent research has concentrated on the smaller currency unions that have nevertheless existed, and has excluded other factors in socalled gravitation models. This research has pointed to quite substantial gains from currency unions (a shift in the magnitude of 50 per cent or even more according to researchers such as Andrew K Rose, at Berkeley).
Therefore, we must not slacken in our fight against inflation. So far we have only succeeded in the first phase. Therefore it is not a victory. There are still two more phases in the fight against inflation: In the second phase, inflation needs to fall to below 10% in the second half of this year, in line with our forecast. And then, in the third phase, inflation needs to continue to fall to levels close to 2% next year, which will be the best news for the economy. To ensure this happens, we are now considering whether we should leave rates unchanged again or increase them at the next meeting in June. More than before, the new Bank Board is monitoring and discussing money flows in the economy, and above all loans to households, firms and the government. We must look at money. We conduct monetary policy. The term is derived from the word "money", which we label as M and define as the quantity of money in the economy. We have added elements of monetarism to New Keynesian economics, the predominant school  2/7  BIS - Central bankers' speeches  of thought at the CNB so far. Our DSGE model created according to the New Keynesian theory ends with the three-month PRIBOR interest rate (Michl 2019b).

In his article, "Less is more" for the IMF's magazine, Professor at the University of Chicago and former Governor of the Reserve Bank of India Raghuram Rajan said: "Central banks have constrained their own policy space with asymmetric and unconventional policies, ostensibly intended to deal with the policy rate touching the lower bound. They have triggered a variety of imbalances that are making fighting inflation harder today." More purposeful and less interventionist central banks would probably do better than a high-inflation, high-debt, low-growth world (Rajan, 2023). For central banks, less can mean more. Therefore, our strategy in the Czech Republic is "higher for longer", i.e. to maintain interest rates at higher levels for longer. Regarding government debt, I stated that monetary policy is at its tightest in 20 years and is slowing the economy. A problem arises if the government helps the economy with subsidies, supports and contributions at the same time. This counters our fight against inflation and the economy is not dampened as much as it should be. Therefore, the CNB must consider the following: Should we start competing with the government and dampen the economy by, for example, increasing rates? Should we further push down demand, just to have it subsequently fostered by the government with some kind of supports or subsidies? And so on ... it is a vicious circle. It would be better if both policies were anti-inflationary at the same time.
Simulations by Banco de España staff show that, under plausible assumptions, the deleveraging process of the public sector towards levels considered safer will be very gradual in Spain, and in developed economies in general, possibly taking up to several decades to reach the reference value of the 60% debt-to-GDP ratio. Therefore, continuing with the ongoing fiscal consolidation process to ensure exit from the Excessive Deficit Procedure (EDP) must be a priority. The Spanish Public Administration has been subject to this procedure since 2009, under the corrective arm of the Stability and Growth Pact (SGP). In 2016, the EU Council updated the conditions under which the EDP exit would take place, and set 2018 as a deadline. In particular, the Council requires the public deficit to reach 2.2% of GDP this year and to achieve an accumulated structural effort over the period 2016-2018 of 0.6 pp of GDP. While it is very likely that the General Government deficit will be below 3% in 2018, achieving the required structural effort will call for further fiscal adjustments. In fact, according to the European Commission, the structural component of the public deficit in Spain is still very high, at around 3 % of GDP this year, in fact, the largest of the euro area members. In addition, public finances will have to face the challenge posed by ageing population.

03.04.2018  Spain: From Recovery to Resilience Banco de España-IMF High-Level Seminar Luis M. Linde Governor  Ladies and Gentlemen, Let me welcome you to this Banco de España and International Monetary Fund joint conference devoted to the recent evolution of the Spanish economy in the Euro-Zone and European Union context. I would like to thank the International Monetary Fund, represented here today by David Lipton, First Deputy Managing Director, Poul Thomsen, Director of the European Department and Andrea Schaechter, Mission Chief for Spain, for their proposal to organise this conference. The Banco de España was more than pleased to accept, considering it to be very timely and of great interest. As to the title of the conference: “Spain: From Recovery to Resilience”, allow me, before going forward, a candid clarification: I can assure you that it is far from our intent to suggest any pessimistic forecast or premonition. The title refers to our economy’s resilience in the face of a hypothetical cyclical downturn which, needless to say, we hope will be later rather than sooner. In 2017 Spain’s economic recovery maintained the strong growth path of previous years, exceeding expectations for the fourth year in a row. In particular, GDP grew by 3.1%, meaning that the economy has grown above 3% for the third consecutive year. Strong domestic and external demand pushed GDP up, and the economy has proved quite resilient to uncertainty shocks.
However, I would like to mention two points which are closely related to financial stability. One is the noteworthy overseas expansion by Icelandic banks, which has major ramifications for the financial system. Among the changes that this entails is that the banks are now less exposed to volatility in the Icelandic economy, because of the large share of their activities that has been transferred abroad. At the same time, they are left more prone to shocks originating in foreign markets. This development calls for a review of the Central Bank’s working procedures. I shall not go into details here of possible changes, which were discussed in Monetary Bulletin last autumn. The other point is the growth in lending by the credit system, in particular by the banks. The surge in lending over the past two years is a cause of concern both for financial stability and the Central Bank’s inflation target. Accounts of the credit system are published quarterly and the most recent statistics show that lending by the credit system as a whole increased by 16% in real terms last year. The credit system embraces all undertakings involved in lending activities, including the HFF and the pension funds. The latest figures for the largest credit institutions show that domestic lending by the deposit money banks (DMBs) grew by 40% over the twelve months to the end of February. By far the greatest increase has been in mortgage lending.

In short, good governance works and we should all simply try it! In conclusion therefore, I would like on behalf of Bank of Zambia and indeed on my own behalf to commend the Zambian commercial banks, international banks and development finance institutions that have participated in this syndication. This is not only testimony of their confidence in Celtel Zambia plc but confidence in the Zambian people and the economy as well. I thank you. 2  BIS Review 126/2006
As a result, the excess reserves wouldn’t be lent out; instead, the excess reserves would stay parked at the Fed. That said, the Fed’s exit from its current monetary policy stance is going to be more complicated than normal. Normally, when we exit, we simply decide when we are going to raise the federal funds rate target. This time, we have a broader set of decisions to make. For example, do we drain reserves from the banking system? Is it better for the banking system to operate with $ billion of excess reserves or $ trillion? This is an issue we have to explore further. In the meantime, we are testing our ability to drain reserves through the use of reverse repurchase agreements. It is important that this option be available to us in the event we want to use it. Although it is going to be more complicated in the sense that we have more decisions to make about how to manage our exit, I believe the process is manageable. The fact we have  BIS Review 161/2009  7  more levers doesn’t mean that we will have trouble exiting when the time comes, it just means that we will have more choices to make. Turning to the issue of the Federal Reserve’s monetary policy independence, I believe this is a critical issue. As you know, the Paul amendment, which was inserted into the House Financial Services bill, would subject the Federal Reserve’s monetary policy decisions to audit by the General Accountability Office (GAO).

For example, the recent reports issued by the Senior Supervisors Group (SSG), which is composed of regulators from five major countries, indicated that the banking regulators both here and abroad should have been tougher in the assessment of the quality of management, of governance, and in terms of these banks’ risk management  1  There is a growing body of economics literature on this issue that links monetary policy to leverage. See, for example, Tobias Adrian and Hyun Shin, manuscript in preparation for the forthcoming Handbook of Monetary Economics, volume 3, currently circulated as Federal Reserve Bank of New York Staff Reports, No. 398, October 2009. 2  BIS Review 161/2009  capabilities. 2 We should also have pushed harder for better management information systems and more simplified corporate organizations and structures. We should have done more to identify best practices in terms of risk management, liquidity, capital, and compensation and pushed harder to force the laggards to move to best practice standards. We are learning a lot about how to do supervision better and are working aggressively to apply those lessons to our current practices. The Supervisory Capital Assessment Process or SCAP is an important example of the value of broad, horizontal examinations. In the SCAP, the Federal Reserve worked in conjunction with other U.S. regulators to assess the impact of a stress economic environment on the 19 largest banking organizations in the country simultaneously. This approach made the SCAP a particularly powerful exercise.
In our day, the promise of precious metal has been replaced by the central bank’s promise of price stability. Underpinning this promise is an institution, that is to say a bureau of statistics, which can measure general price developments, generally by means of a consumer price index. The statistics bureau must be independent of the political authorities, unlike in Argentina recently where the director was replaced because the government did not like the price figures.21 Or unlike the  17  Between 1526 and 1542 the silver content of the circulation coin groat was reduced by 23.2 percent while the coin retained its nominal value of four pence. The King’s gross seigniorage increased from 2.1 to 20.1 percent. Glassman, Debra and Redish, Angela (1988) “Currency depreciation in early modern England and France”, Explorations in Economic History, Vol. 25, Issue 1, pp. 75–97. 18  Normally, it is Parliament’s responsibility to appropriate money and the Crown’s prerogative to spend it. When taxation occurs through inflation, this rule is broken. 19  One of the classic accounts of hyperinflation is provided by Fergusson, Adam, When Money dies. The nightmare of the Weimar Hyper-Inflation, London: William Kimber & Co.  20  Owing to a lack of reliable means of payment, the recovery of production capacity and commerce in Germany after the war came to a standstill. On Sunday, 20 June 1948, under the direction of Ludwig Erhard, a largescale currency reform was carried out in the western zones of occupation.

During the great British debate on the gold peg after the Napoleonic Wars, even David Ricardo, the gold standard’s most ardent defender, warned against returning to earlier parity values after a sharp depreciation. Friedman, Milton og Schwartz, Anna Jacobson (1963), A Monetary History of the United States of America, 1867–1960, National Bureau of Economic Research, p. 82. 34  Since the past is our laboratory and the source from which we draw lessons, it is more fruitful to try to understand the past on its own terms than to sit in judgement over it. Anything else would make history as a serious branch of study into a meaningless exercise, reducing it to a running, constantly changing contemporary commentary on what has been. 35  In the opinion piece “Mytedannelsen om paripolitikken” [Myth-making and par policy], published in Aftenposten on 30 May 1998, Hermod Skånland wrote: “...The Bank’s newly appointed governor, Nicolai Rygg, was just as convinced as anyone else, both here in Norway and internationally, that pre-war conditions in the monetary system needed to be restored. (Skånland then shows that economic growth in Norway under par policy was actually stronger than in neighbouring countries.). Against this background, it may be difficult to understand that par policy has endured as the great destructive blunder of the 1920s, with Nicolai Rygg as the man responsible for the hard times.