samchain/econo-pairs-v1 huggingface dataset:
In this sense, we, at the BNB, just as we have done so far, will always support an economic policy in Bulgaria that does not threaten long-term economic interests at the cost of achieving quick economic effects – such as the policy of continuing structural reforms, enhancing the efficiency of institutions and improving the general environment for doing business in this country. The BNB traditionally supports conservative fiscal policy owing to which Bulgaria today demonstrates excellent fiscal indicators and given the stable banking system we have reasons to expect that our new issue of euro-denominated Bulgarian global bonds will be well received. We would also welcome efforts at speeding up privatization and active concessioning – inasmuch as they would not only strengthen our country’s fiscal position, but would also improve the long-term competitiveness of the Bulgarian economy. We, however, cannot be indifferent to any ungrounded economic experiments whatsoever. At the same time, the range of working solutions for Bulgaria’s economic prosperity must also take into account the analysis of the comparative advantages of the Bulgarian economy in a global context. In fact, it is exactly the current crisis that has highlighted and provided empirical evidence of the resilience of Bulgaria’s economy. Allow me to recall that before the crisis many argued that the currency board in Bulgaria was restraining the economy’s flexibility and that the high current account deficit (above 1/4 of GDP in 2007) was a dreadful “imbalance” that could in no way be funded in the event of capital flight from the country.

I hope the WIBC Asia Summit will provide a useful platform for various stakeholders from Asia, Middle East and beyond, to explore new ideas and build networks to catalyse further growth. I wish all of you a fruitful conference. 3  An overview of infrastructure opportunities in ASEAN, KPMG. BIS central bankers’ speeches  3
In other words the response would not be automatic and could go either way: rates could go up or down as the situation demands. 5 Conclusion  The financial crisis reminded us that the past is not always a good guide to the future. It taught us there is more to resilience than the narrow economic cycle. And it demonstrated that policy needs to prepare for the unexpected. While it is important to remain humble and vigilant, I think that the Bank of England has learned the lessons of the crisis. We have realised that we are uncertain about supply as well as demand. We have expanded our view of resilience to cover the financial cycle and risks to financial stability as well as the business cycle. And, through the FPC, we have been given a mandate to identify risks and new tools and powers to address those risks before they materialise. Those lessons have guided our approach to Brexit. We have not assumed the future will look like the past: different outcomes from the negotiations could have very different effects on the economy. The MPC have set monetary policy based on what we expect to happen in the most likely outcome, based on the assumption of a smooth transition to an average of possible end-states, but with full recognition of the risk that things could turn out differently. And the FPC have actively sought to insure against the most serious downside risks.

As the interest rate differential had hardly changed, and these countries’ currencies were less sought after as safe havens than the Swiss franc, they were subjected to considerably less upward pressure against the euro than the Swiss currency. The situation in Switzerland was made even more difficult by the fact that, as a result of the minimum exchange rate, both the Swiss franc and the euro lost value against the US dollar and the pound sterling. This put the broad overvaluation of the Swiss franc that had led to the introduction of the minimum exchange rate into perspective. Both of these factors, i.e. the disappearance of the interest rate differential and the reduction of the overvaluation, finally led to rapidly increasing pressure on the minimum exchange rate. At the beginning of 2015, it became clear that the minimum exchange rate of CHF 1.20 per euro was no longer sustainable from a monetary policy perspective, and would require everlarger foreign currency purchases to enforce it. If the SNB had ignored the changing reality and attempted to maintain the minimum exchange rate, the extensive interventions would have led to the bank losing control over its balance sheet and thus over longer-term monetary conditions in Switzerland. Putting this decision off would also not have helped the economy. The minimum exchange rate was introduced as an instrument against widespread and extremely pronounced Swiss franc strength. In this new phase of general euro weakness, it was no longer the right tool.
Panel b): seasonally adjusted series; based on an application of Shapiro, A.H. (2022), “How Much Do Supply and Demand Drive Inflation?”, FRBSF Economic Letter, No 2022-15, Federal Reserve Bank of San Francisco, 21 June; and Shapiro, A.H. (2022), “Decomposing Supply and Demand Driven Inflation”, Working Papers, No 2022-18, Federal Reserve Bank of San Francisco, October. For euro area results see Gonçalves, E. and Koester, G. (2022): “The role of demand and supply in underlying inflation – decomposing HICPX inflation into components”, Economic Bulletin, Issue 7, ECB. The latest observations are for August 2022 for the euro area and September 2022 for the United States. Chart 5 Euro area household expectations and Purchasing Managers’ Index  Sources: Panel a): DG-ECFIN and ECB staff calculations. Panel b): S&P Global. Notes: Panel a): expectations for the next 12 months, standardised over the period January 1985 to December 2019. The latest observation is for September 2022. Panel b): the latest observation is for October 2022. And as the weakening in demand is likely to rapidly slow down GDP growth while the boost from the reopening of the economy abates, evidence suggests adverse supply and energy shocks will continue to depress output (Chart 6). Similarly, the contribution of supply shocks to inflation is likely to endure in the coming months, as a result of the lagged effect of previous bottlenecks and the staggered pass-through of wholesale energy costs into retail bills.

SPEECH  The complexity of monetary policy Keynote speech by Fabio Panetta, Member of the Executive Board of the ECB, at the CEPR-EABCN conference on “Finding the Gap: Output Gap Measurement in the Euro Area” held at the European University Institute Florence, 14 November 2022 The output gap – the difference between actual and potential output[1] – plays an important conceptual role in central banking. In normal conditions, the output gap represents a gauge of inflationary pressure by signalling the amount of slack in the economy. [2] In turn, this provides a yardstick against which central banks calibrate monetary policy. By steering demand so that actual output matches potential central banks can stabilise inflation around their targets. From the global financial crisis until the start of the pandemic, variations in the output gap reflected prominently the role played by demand factors. The implication for monetary policy was relatively straightforward. The shocks to demand pushed output, employment and inflation in the same direction, leading to a positive correlation between output gaps and inflation. Monetary policy could aim to close the inflation gap without facing major trade-offs in terms of the output gap. Central banks ultimately faced the difficulty, not so much of diagnosing, but of delivering: once inflation fell too low, their conventional instruments were constrained as interest rates approached their lower bound. [3] Central banks had to deploy non-standard policy tools to lift demand. Today we are in a new environment.
5  This is also an implication of the model presented in Auclert, 2015, Monetary Policy and the Redistribution Channel. 2  BIS central bankers’ speeches  A related consideration is that refinancing to a lower interest rate requires significant resource costs, which would not be incurred if the borrower’s interest rate adjusts automatically when market interest rates decline. One estimate of the cost of refinancing a mortgage, which includes costs such as those on a property appraisal or title insurance, is $ plus one percent of the loan amount. 6 Under this estimate, total refinancing transaction costs over 2008–2013 exceeded $ billion. 7 Furthermore, the re-underwriting of existing loans leads to resource constraints in the mortgage origination industry during refinancing waves, frequently followed by lay-offs when the refinancing boom is complete. 8 Timing a mortgage refinancing optimally also requires time and attention from the borrower, and can lead to refinancing mistakes, particularly by less financially sophisticated households. 9 But do these considerations make ARMs preferable to FRMs, either from the point of view of monetary policymakers, or public policy more generally? Not necessarily. FRMs have many advantages; for example they are simple for borrowers to understand, and clearly limit household exposure to interest rate volatility. Consider too the incidence of interest rate adjustments: widespread reliance on ARMs may have unattractive distributional consequences for monetary policy, since it implies that a larger component of monetary transmission falls on a subset of highly indebted mortgage borrowers.

CPI inflation is judged in turn to be 1.1% after twelve months and 2.0% in twenty-four months’ time. Thus, CPI inflation will be moving closer to underlying inflation. One reason for this is that the downward effect on inflation from house mortgage interest expenditure is diminishing. In other words, just as the previous marked fall in interest rates held back CPI inflation so that it was well below the underlying trend, so house mortgage interest expenditure is now tending to bring them closer together. As I have pointed out before to this Committee, monetary policy ought to disregard these direct effects of interest rates because repo rate adjustments mean that they are accentuated. It is also for this reason that the Riksbank is currently focusing monetary policy on inflation’s underlying rate, measured as UNDIX. Transitory factors – changes in indirect taxes, subsidies and house mortgage interest expenditure – are judged to have a downward CPI effect of 0.5 percentage points in one year’s time. The contribution from interest expenditure is still negative because the process whereby house mortgage loans at high rates are renewed at the present lower level is still in progress. As the earlier house mortgage loans had a long duration, this process takes time. In two years’ time, however, the CPI contribution from transitory factors is judged to be an upward effect of 0.1 percentage point.
Multiple one-off factors had significant effect in the past year, which include the abrupt increase in the prices and volumes of oil imports, and the sweeping floods, which troubled our exports in the third quarter of the year. This year, the current account deficit is expected to drop below 11 % of GDP, mainly due to the slowed down growth of imports, and the recovery of exports growth, which has been evidenced since the last quarter of the previous year and the beginning of 2006. In January, the exports of goods increased by 27.5% on annual basis, and exports, excluding energy goods, increased by 17%. The continuing implementation of the reforms in the labour market and education, and the improvement of the business environment, including a significant improvement in the operation of the judiciary, are of key importance for maintaining competitive advantages and ensuring sustainability of the country’s external position, as well as preserving the interrelation between salary growth and productivity of labour. As we are well aware, the revenues from tourist services influence considerably the country’s balance of payments (15% of the country’s exports of goods and services in  2  BIS Review 22/2006  2005), which necessitates the very fast elimination of all existing obstacles to the development of this industry. Before I conclude my presentation, I would like to focus on inflation dynamics. At first sight, this variable does not seem to be such a great challenge for us, compared to the issues discussed above.

The growth of investments and the concomitant improvement of employment, increase both the current incomes of households, and their expected future incomes, which is associated with increased consumption and decrease in the savings in the economy. As a consequence of these processes, the gap of the balance of payments current account widened to levels over 5% of GDP in 2003 and 2004, and further expanded to 11.9% as of end-2005. From the perspective of current account immediate dynamics, each economy faces the question if the current level of deficit or surplus is determined by structural factors, i.e. it is close to a balanced level, which can be maintained within a medium-term, or it is the consequence of unsustainable trends and one-off factors. Both groups of factors played an important role in the development of the current account deficit in 2005. First of all, the above-mentioned growth of investments was accompanied by considerable imports of investment goods. In 2005, the imports of this group of goods grew by 31.2%, while their share in the total structure of imports reached up to 28%. This trend was associated with a slow-down in the growth of imports of non-energy raw materials and consumer goods. In the current year, we expect the rate of import of investment goods to remain high, given the rapid pace of technological innovation of the economy, which is mainly accounted for by the forthcoming EU membership of our country.
The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary to further address risks of too prolonged a period of low inflation.” With this statement, the ECB has left no doubts about its resolve to avoid any downward turn in the euro area inflation developments, because such developments would be extremely harmful. With interest rates at their effective lower bound and persistently timid growth prospects, lower than expected inflation rates would increase the real value of debt, slowing down the deleveraging process of borrowers, both public and private. If a low inflation outlook became entrenched in the expectations of firms and households, the real interest rate would rise, leading consumers and investors to postpone their expenditure plans. A vicious circle of lower demand and lower prices could ensue. How would the ECB react, should the risks of a protracted period of low inflation materialise? But what exactly could the ECB do in the face of a protracted period of low inflation and economic stagnation? As I have already mentioned, the ECB stands ready to deploy additional unconventional instruments, should the likelihood of this scenario increase. The policy response would involve a broad-based asset-purchase programme. The experience of other countries with such programmes testifies that they can be effectively designed.

Vítor Constâncio: Recent challenges to monetary policy in the euro area Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the Athens Symposium ‘‘Banking Union, Monetary Policy and Economic Growth’’, Athens, 19 June 2014. *  *  *  Ladies and Gentlemen, Seven years have passed since the financial market turmoil in the summer of 2007 marked the beginning of the financial crisis and the ensuing recession. These years have been challenging for all central banks. They have marked the end of a long period of remarkably stable, good macroeconomic performance. The widespread adoption of an explicit price stability objective had been conducive to low inflation outcome in an environment of prolonged economic growth. Existing monetary policy strategies – mostly variants of the inflation targeting model, though with notable exceptions at the ECB and at the Federal Reserve – appeared to be adequate and sufficient to attain this goal. Consistently with the Tinbergen principle, the primary objective of price stability was achieved everywhere through a single, conventional monetary policy instrument: a short-term interest rate. The global financial crisis changed this situation abruptly. Since then, some central banks have been endowed with additional macro-prudential instruments and a more explicit mandate to preserve financial stability. While no explicit change in monetary policy strategies has taken place, it is fair to say that there has been a generalised increase in the attention paid to banks’ balance sheet conditions and to the evolution of credit.
But as it normally takes a while before an upturn in economic activity has an impact on employment, it is very possible that the Riksbank will need to raise the repo rate in a situation where unemployment is still high. This is also something we are assuming in our most recent forecast. There is then a risk that unreasonable requirements will be made of monetary policy. It will then be important to bear in mind that the primary objective of monetary policy is to create good long-term conditions for all participants in the economy. It is important that we have an active discussion of the Riksbank’s policy. But for the discussion to be fruitful it must be based on realistic expectations of what monetary policy can and cannot achieve. Sweden is a small, export-dependent economy and when economic activity abroad suddenly falls, monetary policy cannot prevent negative effects from this on our economy. But we can alleviate these effects. As the financial markets are integrated, we cannot prevent an international financial crisis having effects here, too. Then we must use other tools, parallel to our interest rate policy, to make the financial system function in the best possible way given the circumstances. This is what we have done throughout the autumn and we will continue to do this as long as is necessary. BIS Review 38/2009  7

There is a lot of policy tightening still in the pipeline. [2] Given this, when taking its decisions the MPC needs to be forward-looking in assessing inflationary pressures. That is why we put emphasis on inflation forecasts, both in our analysis of the economic situation and in our communication of policy decisions and their rationale to financial markets and the public. [3] The MPC needs to calibrate its monetary policy actions such that they have the appropriate impact on inflation as the lags in transmission unwind. In doing so, the MPC must recognise and quantify how much of the effect of its previous policy decisions still has to come through. All the while, the MPC needs to recognise the uncertainties it faces. As the American baseball player turned philosopher Yogi Berra famously said: “It is difficult to make forecasts – especially about the future”. New shocks to the economy can always happen (as my own experience on the MPC over the past 18 months amply demonstrates). And how previous disturbances to the economy ultimately affect inflation is itself unclear. This uncertainty is why the MPC has always emphasised the risks around its central forecasts. Famously, the MPC has presented its forecasts in the form of gradated fan charts, rather than as simple paths for the modal outlook. [4] As recent experience demonstrates, MPC communication has emphasised the skews and risks around the central projection as much as the central projection itself.
This brings me back to the reforms in the UK. At their heart lies the objective of putting the stability of the financial system at the centre of the regulatory mission. You may say, “surely that’s not new”. I would disagree – our overriding objective must be to create a consensus of public opinion which will enable financial stability to be embedded as a public policy objective in the same way that in the wake of the 1970s, low inflation came to be adopted as a necessary condition for stable economic growth. Too often, I hear people say that achieving financial stability needs somehow to reflect a balance with other objectives, such as competition, consumer protection, and the like. I’m sorry, but while these objectives are of course very important, the best way to achieve them is by establishing a stable financial system. Of course, there are judgements to be made on what constitutes financial stability, but those are not judgements that should be a product of murky compromises with other objectives. The assessment of the failures of monetary policy in the 1970s should stand as a clear guide as to why we must establish a strong understanding of financial stability as the driving public policy objective for the financial system.

The absence of a consensus for low inflation in the 1970s as an objective of public policy led to – and I will tell you the source of this assessment at the end – policy making which lacked the courage and conviction to do what was needed to achieve an objective which in itself was not always accepted as necessary. Policymakers did not persist with actions when criticised (criticism will of course happen), they tended to give too much weight to perceived political constraints and too little weight to the cost of failure to achieve the objective of policy. They talked tough, but didn’t match their words with 2  BIS central bankers’ speeches  actions, and their actions in response to criticism tended to be of the “do something” variety. And the result was? A policymaking process and institutions with low credibility in the eyes of the public, a very dangerous place to be. Now, I haven’t made this up, you can read it in one of the best accounts of the failings of monetary policy in the 1970s, the history of the Federal Reserve by Allan Meltzer. The reason for drawing this point out is that if the reforms are to work, we must have a clear consensus that financial stability is a goal which will enable other things that improve the welfare of the public to be achieved more easily. So, what does this mean for important aspects of the regulation of the financial system?