samchain/econo-pairs-v1 huggingface dataset:
See Appendix A.2 to Bailey et al. (2022) for data definitions. Source: Authors' calculations using EU KLEMS, the Penn World Table 10.0 and the Jordà et al. (2017) Macrohistory Database. See Appendix A.1 to Bailey et al. (2022) for more details. In standard economic theory, this wedge, between the return on firms’ investment and the cost of financing it, is a measure of firm profitability. As such, it is a key determinant of investment. Accordingly, we might expect to have seen an increase in investment activity alongside the recent increases in the wedge. But, while the wedge has increased, across the same group of countries, as shown in Chart 6, investment has steadily declined, or, at best, remained stable. In the United Kingdom, shown in the orange line, this decline has been particularly stark since the late 1990s. So, across high-income countries, investment has been low in spite of a rising wedge between the realised return on capital and funding costs: this is what I will refer to as the ‘missinginvestment puzzle’. Page 11  Chart 6: Nominal investment-to-GDP ratio has declined  Note: High-income countries include Finland, Italy, Netherlands, Spain and the United Kingdom. Figure A.3 in Appendix to Bailey et al. (2022) shows that this result is true for a larger sample of countries from 1987. See Appendix A.2 to Bailey et al. (2022) for data definitions. Source: Authors' calculations using EU KLEMS, the Penn World Table 10.0 and the Jordà et al. (2017) Macrohistory Database. See Appendix A.1 to Bailey et al.

SPEECH  Jointly shaping Europe’s tomorrow Introductory remarks by Christine Lagarde, President of the ECB, at the Franco-German Parliamentary Assembly, 21 September 2020 Frankfurt am Main, 21 September 2020 Dear President Schäuble, Dear President Ferrand, Honourable Members of the Franco-German Assembly, I would like to thank you very warmly for inviting me to join you today. As President of the European Central Bank and a French citizen living and working in Germany, it is an honour to speak at this historic forum. This parliamentary assembly is an embodiment of the special relationship between our two countries and their commitment to European integration. I find it essential that the ECB constantly engages in two-way communication, especially with citizens’ representatives. We need to make sure that the ECB’s voice is heard by the people and that the people’s voice is heard by the ECB. This is why events like today’s are so important for me. Our regular interlocutor is the European Parliament, to whom we are accountable under the Treaty for our monetary policy tasks. Transnational settings like this one give us a further chance to look past nation-specific concerns as we discuss Europe’s future. The coronavirus (COVID-19) pandemic is a crisis of unprecedented magnitude. Many of you will recognise the famous words of Jean Monnet, one of the founding fathers of the European project, who said: “Europe will be forged in crises and will be the sum of the solutions adopted for those crises”[1] . This pandemic has proven him right once more.
Today, there are no signs of a financial bubble, but we are ready to act, if necessary, by implementing macroprudential measures, in the framework notably of the Haut conseil de stabilité financière (High Council for Financial Stability – HCSF) that you created via the Banking Act of 2013. For instance, at our eighth meeting held on 15 March 2016, we issued a warning about the office sector in the Paris area. BIS central bankers’ speeches  1  2. Monetary policy thus contributes greatly to our economy, but it can’t do everything. It cannot be the only game in town. It is vital that Europe and France seize this opportunity now. In France, growth is expected to be both robust and inadequate: Robust, as it should remain in 2016 at least at the 1.2 percent level observed last year. But inadequate, as it will probably linger a little below the euro area average of 1.4–1.5 percent. For growth and employment, three essential actions are necessary: reforms in France; private and public investment; the coordination of economic policies in Europe. First, in France, orderly and sustained reforms are needed to rebuild confidence. Keeping our public deficit and our debt under control is a contributing factor: the good figures published on Friday (deficit reduced to 3.5% in 2015) are another reason to strictly respect our European commitments by bringing it below the 3% limit in 2017.

We believe improving our credit provision infrastructure in this way can improve credit allocation and support firms to get the credit they need to grow, primarily by reducing information asymmetry between the creditor and the lender. Typically in the UK, it is only an SME’s bank that has ready access to the data needed to price a loan. This makes it difficult for firms to shop around and get the best rate. Our approach 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  prioritises using technology to more accurately and competitively identify creditworthy borrowers, as a means to increasing aggregate credit flowing to SMEs. Open to changing the way we work  My third theme is the importance of the Bank of England being open to changing the way we work. Of course, it is not just the private sector who should be embracing change. We, as central banks, need to reflect on our own way of working. In particular, if we are going to regulate the digital economy effectively we will need to equip ourselves with appropriate digital tools. Central Banks ingest and analyse huge volumes of data in the course of our regulatory activity. This is necessary for our surveillance, but comes at a cost to the firms we regulate. The bill for regulatory reporting in the UK is estimated at between £ and £ a year. We want to leverage modern technology so that the way we collect and analyse data becomes cheaper, faster, and more effective.
It is not MAS’ role to front all investor education – this is where industry bodies and consumer groups come in. However, MAS will need to act as a catalyst to increase the focus on investor education in the financial sector. MAS can set out clear directions for industry, do more to explain its own market conduct regulation to investors and consumers, work with industry and other partners to co-ordinate current education efforts and, where relevant, co-fund with industry new investor education initiatives. Focusing and targeting our development efforts Fifth, we need to focus and target our development efforts. Despite the adverse environment, there are still opportunities for Singapore. The Financial Services Working Group (FSWG) set up at the beginning of the year has identified three promising areas: wealth management, universal processing centres and an Asia Risk Exchange. In identifying wealth management, the Working Group has reaffirmed a key thrust of our developmental efforts. It has gone on to single out alternative assets, such as private equity and hedge funds, as areas for development. Universal processing centres and the Asia Risk Exchange will be two new fields for Singapore, where Singapore’s efficiency, technology and infrastructure will be important strengths. For universal processing centres we need to consolidate global transactional flows into Singapore. The Asia Risk Exchange will combine Singapore’s existing insurance and capital market expertise into a new physical vehicle for the transfer of large and sophisticated risks.

Many of you are very knowledgeable about these topics and we hope you will take the opportunity to share your insights on these questions. The GFXC is not only seeking views at the tails, but also those more in the middle of the spectrum as well. Importantly, all perspectives are welcome. Conclusion The request for feedback is an opportunity to engage at an industry level in supporting the resilience of this critical and fundamental market—one that represents far more than the sum of its parts and players. As I said in 2015, 3 “the transactions that take place [in the FX market] are the lifeblood of a global economy that comprises many different national currencies.” At that time, I called upon the industry to take action and I am impressed by what I have seen through the work in developing the Code and in the spirit in which it has been received so far. But that work isn’t over—it never is. Best practices do not work without the ongoing commitment of those in the industry, those making the choices each day. No Code, and in fact no law or regulation, can force all 5/6  BIS central bankers' speeches  participants in a market as broad and diverse as FX to maintain a marketplace that values openness, resilience, high ethical standards, and competition. But, that fact is no reason to forego striving for such a marketplace. Developing the Code has been one way of working toward that goal.
Since then the picture has been revised again, and now the economic downturn around the end of 2004/beginning of 2005 appears much milder than was indicated by the statistics at that time. Today we have a new description of history to base our own assessments on. This type of statistical measuring problem was one of the things that made Francesco Giavazzi and Frederic Mishkin advice against having targets for production or employment in their evaluation of Swedish monetary policy. I agree with them. The best we can do is to balance monetary policy so that the economy follows what is roughly considered to be a long-term favourable path. This balance should of course be within the scope of our inflation target. The current situation and monetary policy considerations This seems like a good point to move on to talk about the Riksbank’s current views on inflation prospects. The economy has grown rapidly in recent years. Over the coming years we are expecting growth in the economy to slow down and approach a growth rate that is more sustainable in the long term. One reason is that our assessment is that international economic activity will slow down; another is that the productivity increases will slow down. Over the coming year, GDP growth nevertheless looks to be relatively high. Employment will rise and households will increase their consumption at a rapid rate. We are assuming that employment will continue to rise during the forecast period, albeit at a slower rate. This will lead to unemployment falling.

Stefan Ingves: Introduction on monetary policy Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Riksdag Committee on Finance, Stockholm, 22 February 2007. *  *  *  Thank you for the invitation to come here! I came here for the first time one year ago, as newlyappointed Governor of the Riksbank. A year passes quickly, and now it is once again time for me to summarise the past year and at the same time report on how the Executive Board of the Riksbank views the prospects for the economy and inflation. Before I begin, I would like to welcome the fact that the Committee has decided to hold this hearing at a later date in relation to the publication of the Riksbank's report. Of course, this means I risk having to answer even sharper questions than usual, but it’s all in the line of duty. It is also important that these hearings are held under the best possible conditions. My most important message today is: •  We have now begun to publish our own forecast for the repo rate. This means that we have taken a further step towards increased clarity and openness in monetary policy. •  Inflation rose last year, but was still below the target. One of the main reasons is the substantial productivity growth. Understanding which mechanisms lie behind the strong productivity has been, and is, an important task for the Riksbank. •  The economic prospects are bright.
They create deposits and credit in multiple terms restricted only by the public’s preference for currency as against deposits and banks’ own need for keeping a safe cash reserve to meet public’s demand for cash. In Sri Lanka, commercial banks could create bank money five times higher than the initial amount of currency issued by the central bank. Because of this ability to self-produce in multiple terms, (in Sri Lanka, that multiplier is 5), the seed or reserve money produced by central banks is also called “high powered money”. Thus, the total money in an economy would be much more than what a central bank would issue to the economy. When that money which is known as money supply chases after the limited availability of goods and services, the general price level would elevate to a higher level. If it happens continuously, inflation sets in an economy imposing an inflation tax on the society. Why is there a preference for inflation tax? There is a general preference for inflation tax for several reasons. First, it is easy, quick and convenient to borrow from the central bank, compared to conventional forms of taxes available to a government. Such conventional taxes need to be backed by legislation, take time to generate the tax revenue and have to be enforced by an elaborate tax administration. It also runs the risk of failing to generate the required revenue due to tax evasion and avoidance.

After the transaction, the central bank has a building on the asset side of its balance sheet. But, at the same time, on the liability side, there is an equivalent amount representing the currency issue of the bank. Governments impose inflation tax on the society by borrowing from central banks. When such borrowings are effected, the government would give the central bank a government security such as a treasury bill. The central bank, in return, permits the government to take away an equivalent amount of currency and spend it to make payments. So, on the asset side of the bank’s balance sheet, it has a treasury bill. On the liability side, this asset is matched by a new liability called currency issued by the bank. But, to acquire that asset, the central bank has to spend only a fraction of the face value of the asset enabling it to make a huge profit out of the transaction. Central banks’ lending to governments become highly inflationary on another count. That happens when the commercial banks make use of this currency issued by the central banks as seed money to produce more bank money in the form of deposits. When governments spend the currency borrowed from central banks, such currency finally gets back to commercial banks as deposits of the public. Commercial banks, in turn, use such deposits to create more deposits and credit.
The main principles of foreign exchange reserve management at the SNB Currently, the management of foreign exchange reserves is enshrined in the National Bank Act (arts. 5, 30, 42 and 46), and defined in detail in the internal instructions drawn up in 2004 and revised in 2008. These instructions are available on our website. Contrary to received wisdom, the SNB is as transparent as possible about the principles surrounding the management of its foreign exchange reserves. Thus, in contrast to other central banks, it publishes quarterly data on its foreign exchange reserves, broken down according to currency and asset class. The basic principles of foreign exchange reserve management are very clear; let me just quickly run through them. First principle: Primacy of monetary policy over foreign exchange reserve management. Concretely, changes in foreign exchange reserves result from monetary policy decisions. The level of these reserves is a variable upon which reserve management policy has no influence. Once this framework has been established, the management of foreign exchange reserves takes place independently from monetary policy. However, the SNB does need to make sure that its investments do not give rise to any conflict of interest with the objectives of monetary policy, or indeed of the SNB as regards financial stability. So, for example, we do not invest in Swiss financials, so as to avoid a conflict between the management of foreign exchange reserves and the SNB’s mandate to contribute to financial stability in Switzerland. As a general rule, the SNB does not invest in Swiss corporate equities.

Prasarn Trairatvorakul: The outlook for Thailand’s economy in the face of concerns about the slowing US recovery and Europe’s debt crisis Address by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Foreign Correspondents’ Club of Thailand, Bangkok, 3 November 2011. *  *  *  Distinguished FCCT Members and Guests, Ladies and Gentlemen, First of all, I would like to thank the FCCT Board for inviting me to share my view on Thailand’s economic outlook in the face of the U.S. economic slowdown and the Eurozone’s sovereign debt crisis. Actually, the organizer’s original intention reflects very well what was in the back of everyone’s mind over the past few months when we talked about key challenges to the Thai economy. But as all of us here today might agree, things have changed so dramatically over the past month alone, with the country now being swept over by the flood. While our feet need to stand firm weathering through and recovering from the flood together as a nation, our eyes cannot lose focus on what happens in the U.S. and the Eurozone. I think it is fair to say that what happens in the U.S. and the Eurozone will likely reshape the global financial and economic landscape over the years to come. And for Thailand, these factors and their implications on the global economy will also determine whether the recovery from the flood will be a rosy or a painful one. So, my talk today will be divided into two parts.
Regarding the internal propagation of the shock to commodity prices, food prices have increased less locally than internationally, indicating a compression of margins in the industry. Overall, this compression reverses the expansion they posted in the second half of 2008 and throughout 2009, after the fall in external prices (figure 13). However, it cannot be ruled out that, if international prices continue to rise, further effects on domestic inflation may be observed. As for oil, due to conditions inherent in this market, pass-through to consumer prices has been instantaneous. Facing additional shocks, the stabilization system in place could help smooth short-term fluctuations in fuel prices. Nonetheless, it is not its objective, in a mediumterm horizon, to isolate local price movements from external ones. In addition, the effects might be amplified if the availability of hydroelectric energy diminishes increasing the dependence on thermal energy generation based on oil derivatives. Recall that in 2007–2008 energy prices rose considerably because of an electric production mix that was more intensive in thermal generation at a time that the oil price was hitting record highs. Today, the marginal cost of electric generation is 25 percent below its peak of 2008 (figure 14). Another difference between the current situation and the episode of 2007–2008 has been the evolution of the exchange rate.

We now have a much better sense of why: closely inter-connected global markets, once disrupted by deep uncertainty, can cause contagious collapses in confidence, output and asset prices as participants take precautionary action through fight or flight.26 This is the economics of infectious diseases. The stronger the connections, and the greater the uncertainty about them, the larger the potential scale of the epidemic. A version of this contagion problem may be operating now. The network is the world trading system and global supply chains rather than global interbank and security markets. And the uncertainty surrounds import tariffs rather than sub-prime defaults. But the same precautionary responses, whether fight or flight, appears to be in play, causing out-sized responses in asset prices and activity. 25 26  Carney (2019). Haldane and May (2011), Allen and Gale (2000) and Watts (2002). 25  All speeches are available online at www.bankofengland.co.uk/speeches  25  Chart 28 plots the global trade network on two dates – 1980 and 2018. The wiring of the global trading system has become conspicuously more dense over that period, with the ratio of trade to GDP increasing by 50%. This increased connectivity in the world trading system has generated huge benefits. But that same connectivity has also increased the system’s potential to transmit recent fear and loathing, as uncertainties have clouded its future. Chart 28: Global trade network in 1980 and 2018 1980  2018  Sources: IMF Direction of Trade Statistics and Bank of England calculations.
This in turn may lead to lower inflation and economic activity and the central bank therefore wishes to lower the policy rate. For reasons of comparison, let us first assume that neither the central bank nor other economic agents recognise that stress may arise. The blue lines in the panel show the path for the key policy rate, the output gap, inflation and financial imbalances obtained in this case. Capacity utilisation increases and inflation returns to the target. At the same time, the low interest rate level leads to an increase in financial imbalances in the economy. If we use the framework I just described instead, the central bank will take into account the possible impact of financial imbalances on inflation and output and will therefore reduce the interest rate somewhat less. In this case, it takes longer for inflation to move up to the target. The policy stance also results in a somewhat weaker increase in activity. At the same time, the slightly higher interest rate contributes to dampening the build-up of financial imbalances. In this example, a higher interest rate does not provide any gains as the assumption so far is that financial stress does not arise. Let us now see what occurs if financial stress arises after a period, with all else being equal to the first scenario. Chart: Financial distress does arise The purple lines in the panel again show a situation where the central bank has taken into account the possible effect of monetary policy on risk in the financial system.

Technically, this project is a real challenge and it will contribute to the definition of smartcontract standards for the automation of tokenised financial markets and the interoperability of CBDCs. These standards are necessary to allow the tokenisation of finance to take off securely and to reduce fragmentation in this environment. In case of success, project Mariana could be an important step toward the improvement of cross-border and cross-currency payments. Confident in the strength of our cooperation with MAS, we hope that other joint experiments will follow the Mariana project. There is still a lot to be done, especially on more complex financial activities around the lifecycle of financial securities in a cross-border and cross-currency context. In conclusion, I would like to say that financial innovation is promising and exciting but can be for an institution like the Bnaque de France, which has among its core mandates to ensure financial stability, a source of issues if not concerns. It is therefore for us in any case very stimulating and leads us to reconsider and adapt our role, our policies and our services. To that end, with the help of our team in Singapore and the new leadership of Stéphane Latouche, I very much hope that we will be able to continue  3/4  BIS - Central bankers' speeches  working with you here in Singapour, and in particular with the MAS, to better master innovation and build the future of our financial system. Thank you all for your attention. 4/4  BIS - Central bankers' speeches