samchain/econo-pairs-v1 huggingface dataset:
Some say that macroprudential policy is a “blend of old and new” policy area, and even mention the Swedish credit regulations from the 1950s-1980s as an early example of macroprudential policy measures. 13 The “blend of old and new” also applies to the challenges 11  See, for instance, Borio, C. and White, W.R., “Whither monetary and financial stability? The implications of evolving policy regimes”, BIS Working Paper 147, 2004. 12  See, for instance, the speeches by Lars Nyberg “The mortgage market from a Riksbank perspective”, published on 11 November 2004, and “House price developments and monetary policy “, published on 19 December 2005, and my own speech “Introduction on monetary policy”, published on 26 October 2006. 13  See, for instance, Galati, G. and Moessner, R., “What do we know about the effects of macroprudential policy?”, DNB Working Paper no. 440, 2014. 6  BIS central bankers’ speeches  connected with the regulations. As I mentioned earlier, one reason for the deregulation of the Swedish credit market in the 1980s was that the effectiveness of the regulations was questioned. This was in turn because they were easy to circumvent. For example, the combination of a loan cap and negative real interest rates created large incentives for regulatory arbitrage, which led to the emergence of a “grey” credit market. A major challenge for today’s macroprudential policy is how one prevents “leakage” from regulations in a particular sector to other sectors not covered by the regulations.

Conclusion •  the Eurosystem is not only helping to create a more integrated financial market but is also contributing to greater financial stability by ensuring a strong and efficient European market infrastructure;  BIS central bankers’ speeches  3  •  Looking to the future, the Eurosystem remains committed to these objectives and will seek to exploit technological advances and innovation while maintaining safety, reliability and, ultimately, confidence and stability. 4  BIS central bankers’ speeches
(2015), “Understanding the role of debt in the financial system”, Bank for International Settlements, Working Paper No 479, January. 3 See Committee on the Global Financial System (2017), “Repo market functioning”, CGFS Papers, No 59; and  International Capital Market Association (2015), “Perspectives from the eye of the storm: The current state and future evolution of the European repo market”. 4 See e.g. Altavilla, C., G. Carboni and R. Motto (2015), “Asset purchase programmes and financial markets:  lessons from the euro area”, ECB Working Paper No 1864; Andrade, P., J. Breckenfelder, F. De Fiore, P. Karadi and O. Tristani (2016), “The ECB's asset purchase programme: an early assessment”, ECB Working Paper No 1956; and Blattner, T.S. and M. Joyce (2016), “Net debt supply shocks in the euro area and the implications for QE”, ECB Working Paper No 1957. 5 For a theoretical disposition, see Duffie, D. (1996), “Special Repo Rates”, Journal of Finance, Vol. 51(2), pp. 493-526. 6 See e.g. International Capital Market Association (2017), “European Repo Market Survey”, No 33, October. 7 Securities purchased under the PSPP have been made available for securities lending in a decentralised  manner by Eurosystem central banks since 2 April 2015. As of 8 December 2016, Eurosystem central banks have the possibility to also accept cash as collateral in their PSPP securities lending facilities without having to reinvest it in a cash-neutral manner. The aim of securities lending is to support bond and repo market liquidity without unduly curtailing normal repo market activity.

I will also provide empirical evidence that challenges the view that financial regulation has adversely impacted repo market activity so far. But I will also argue that further evidence is needed to draw conclusions on this matter. 1 / 10  BIS central bankers' speeches  Asset purchases and repo market activity Let me start with the impact of central bank asset purchases on recent repo market activity. Asset purchases may have two broad effects on repo markets. The first is their impact on excess liquidity. With central banks exchanging large amounts of reserves for longer-dated securities, banks may no longer need to tap the interbank market, both secured and unsecured, to manage their short-term liquidity needs. As a result, trading volumes may fall. The second effect is closer to one of the main transmission channels of asset purchase programmes, namely portfolio rebalancing. In imperfect financial markets, those in need of scarce securities, or those who have a special preference for them, need to bid harder to obtain them, thereby pushing up their price and lowering their yield – which then delivers financial conditions supportive of higher output and prices in the real economy. There is growing empirical evidence that this channel has been very effective in the euro area.4 The flip side to this is that, although purchases are conducted in the secondary cash market, price adjustments in this market can also be expected to affect conditions in the repo market. A simple way to think about this is through short-selling.
After all, based on prevailing estimates in the literature, the net effect of these two opposing exchange rate movements could have lifted HICP excluding energy and unprocessed food inflation – I will refer to this as core inflation from now on – by up to 0.5 percentage point over the course of last year. 4 In other words, such estimates suggest that euro area core inflation in 2016 would have been less than half its actual level if it had not been for the euro’s depreciation in the preceding years. While this cannot be ruled out in the absence of a reliable counterfactual, it at least invites suspicion, not least as producer price inflation proved equally resilient lately. Recent price developments therefore raise two important questions. First, has the exchange rate passthrough declined over time and, if so, is it a temporary or a more permanent phenomenon. And, second, if it has declined, is this related to the use of non-standard monetary policy measures? My answer to the first question is that, yes, the pass-through is likely to have been lower in recent 2 / 14  BIS central bankers' speeches  years, mainly for two reasons. The first, and more permanent, reason has to do with structural factors unrelated to monetary policy.

Except for the fact that output is not forward-looking – I will come to this in a minute – this is a standard New Keynesian IS curve where the output gap is based on estimates by the European Commission, the short-term interest rate is the three-month Euribor, expected inflation is taken from the ECB’s Survey of Professional Forecasters (SPF) and the natural rate is taken from the euro area estimates by Holston, Laubach and Williams (2016). Clearly, the real interest rate gap is not statistically significant at any reasonable confidence level. This finding holds true if we use actual ex post inflation – specification 2 – instead of expected inflation, or if we include the real interest rate per se, and not as a deviation from the natural rate, as is sometimes suggested, as in specification 3. The financial crisis and the use of non-standard policy measures do not seem to explain the puzzle either: the real interest rate remains insignificant if we restrict the sample to the period before the outbreak of the crisis, specification 4, or if we take the euro area shadow rate as estimated by Wu and Xia (2016) – specification 5 – a measure that attempts to mimic the joint 9 / 14  BIS central bankers' speeches  effects of unconventional policy measures at the zero-lower bound. What I would argue, however, is that the short-term interest rate is not the appropriate measure to use in an empirical IS curve.
Some researchers have considered the Federal Reserve’s FOMC committee under the leadership of Alan Greenspan to be an example of such a committee. 4 The changes made recently indicate that the FOMC is more of an individualistic committee. The Riksbank is one of the central banks with the most pronounced individual responsibility. Major changes in the way the material for the decision is produced During the years I have worked at the Riksbank there have been major changes in the work on producing the material for monetary policy decision-making. Six years ago our forecasts were based on the assumption that the repo rate would be held unchanged, regardless of whether or not this was a realistic assumption. The forecasts extended two years ahead, compared with the current three years. The analysis was to a great extent based on assessments and discussions. Formal models were used but did not play the same central role as they do today. Although this functioned fairly well, it also involved limitations. For example, it is difficult to see how alternative scenarios – something that is being given greater scope in our analysis – could be used without a more coherent model. The fact that we are now using models more also makes it easier to explain how a forecast is made and to assess the forecasts. In recent years we have made some major changes that have had significance for the way we organise our internal forecasting work.

A few days prior to the monetary policy meeting we have another formal Executive Board meeting where we go through the text of the report in detail and where the report is tabled. However, the forecast can be changed as late as during the monetary policy meeting. It is not until the monetary policy meeting that the text and forecasts of the Monetary Policy Report are finally determined. The Executive Board makes interest rate decisions through a majority vote The Executive Board holds six monetary policy meetings a year. If necessary we can meet more often. The number of meetings is not stipulated by law, but is determined by us Executive Board members. We make decisions on the current level of the repo rate at the monetary policy meetings. We also agree on which interest rate path is most appropriate at the present time. The decisions are made through a majority vote, where the Chairman of the Executive board has a casting vote, and they are announced in a press release. In addition to the Executive Board members, a number of employees from the Monetary Policy Department and the Communications Secretariat take part in the meeting, as well as some advisers and legal advisers. In addition, the Chairman and Vice Chairman of the General Council regularly take part in the meetings and thus obtain a good insight into the work of the Executive Board. They both have the right to express opinions, but not to put forward proposals or take part in any decisions.
On the contrary, the prices of copper and financial assets reflect a positive evolution. Meanwhile, the financial situation of companies, affected by falls in profits and greater indebtedness, could restrict the capacity to undertake new projects (Figure 11). Add to this the still high uncertainty about the evolution of the sanitary conditions, the rate of growth and its composition, as well as the fears of a recurrence of episodes of violence such as those at the end of 2019, as noted in our November Business Perceptions Report. The measures adopted to stimulate credit to companies found a favorable response in the financial sector, which has helped to mitigate the impact of the crisis. Thus, by mid-year, record levels of granted new credit and restructuring of others were achieved under the FOGAPE lines implemented with government guarantee plus the CBC’s Conditional Facility Conditional on Increased Lending (FCIC). In the last few months, the activity in the commercial portfolio has been reduced, coinciding with decline in the financing needs of the companies, as the gradual reopening of businesses has increased the cash flows. Thus, as per the Business Perceptions Report, more than half of those who had already obtained a loan do not report additional credit requirements. Meanwhile, our Bank Lending Survey for the third quarter shows fewer applications for working capital. This couples with the weak demand for funds for investment purposes that the survey has been showing for several quarters, in line with the lag of that part of expenditure.

Bank of England  Page 1  The inflationary consequences of real shocks − speech by Ben Broadbent Given at Imperial College, London 20 October 2022  Bank of England  Page 2  Speech Introduction and summary Between them, the Covid-19 pandemic and Russia’s invasion of Ukraine have inflicted significant damage on the UK’s national income. Today I want to look at the link between these extraordinary shocks, the very high rates of inflation that have followed and the response of monetary policy. I will also draw one particular contrast with the potential response to easier fiscal policy. I’ll kick off with the slightly less dramatic topic of national accounting identities. One of the first things you get taught in macro-economics is that national income is equal to national output: in principle GDP measures both these things, as well as aggregate demand. Accounting identities of this sort don’t tell you anything about what causes what as they’re true by definition (though it’s useful to understand that we earn only what we produce and sell). But you might at least think, given the recovery in whole-economy output in the eighteen months since (Chart 1), that the worst of the drops in national income during the pandemic are well behind us.
I need not stress that these movements are negative for our recovery prospects and, in general, for an economy such as Spain that is increasingly integrated into the global framework and which in recent years has notably improved its competitive capacity abroad. The United Kingdom’s departure from the European Union is, in my view, a negative phenomenon, although the results in recent European elections appear to indicate a brake on or at least a re-drawing of the lines marking these trends. In any event, in the euro area – where our economy operates – it will be very important to maintain the goals of integration into the financial and banking area and to address the capital markets union project. But it is important, too, that the achievement of a true economic union may go beyond the financial realm. Along these lines, our Annual Report refers to the discussion of possible ways forward towards a fiscal policy that includes common stabilisation elements within the euro area, in a setting, such as the present, in which the high levels of public debt restrict the budgetary room for manoeuvre in a good number of countries. Progress here would contribute to equipping fiscal policies within the area with greater strength and, therefore, to minimising the potential adverse repercussions – economic and social alike – of future crises. Thank you for your attention. 8/8

We need, therefore, to assess the extent to which spare capacity is dragging down on prices. In this particular context, we can take some comfort from the growth of earnings (wages and staff bonuses etc) being subdued, below 2%. But with productivity growth having been incredibly low for a while now, it is possible that the rate of earnings growth consistent with achieving the 2% inflation target has been below the 4–4.5% we typically used as a rough benchmark in more normal conditions before the financial crisis and subsequent recession. How and when businesses in aggregate will again generate productivity improvements will be at the heart of the Committee’s deliberations. To be clear, this is about the path inflation takes back to target, not whether it will return to target. The MPC will ensure that it does return to target and that medium-term inflation expectations are anchored to the target. Conclusion To conclude, UK companies are having to adjust to a different pattern of demand, to profound shifts in world trade and prices, and you are having to cope with this while the financial system both recovers itself and adapts to new “rules of the game”. Given some threats to stability linger, the Financial Policy Committee’s primary focus has to be on encouraging continued progress in building resilience in the banking sector. That will pay dividends in the longer run.
This stems in particular from their internal transformations, which rely in large part on the development of open-platform IT systems and on greater use of IT outsourcing, especially via the cloud. The public health crisis has significantly amplified this exposure: the widespread use of remote working has been accompanied by a massive roll-out of new collaboration tools and new software. This (sometimes hasty) deployment of third-party software and new methods of labour organisation has amplified the overall vulnerability of the sector. The need for vigilance is being even further heightened by the fact that cyberattacks are evolving constantly and becoming increasingly sophisticated. On a technical level, this phenomenon can in part be explained by the diffusion of “turnkey” hacking tools and a general increase in computer skills. On an economic level, the huge financial rewards to be gained from attacks is leading to a surge in the number of potential hackers. This dual trend has taken cyber-risk into a whole new dimension: at the company level, it represents a major operational risk, while at the level of the financial system, it has now become a systemic risk. B) Digital innovation in the financial sector offers new opportunities for efficiency gains, but also carries risks. These innovations, especially the use of DLT, have the potential to enhance the functioning of market infrastructures and payment systems, notably by speeding up transactions, reducing the number of intermediaries and lowering costs.

On the other hand, due to its high share in the expenditures of especially low-income households and corresponding purchasing power effects, food prices are given a great importance by policy makers. Meanwhile, the metals, such as iron ore, copper and aluminum, are among the most important raw materials for the industry and construction sector. The reason why commodity prices have been frequently attracting attention is the current fluctuations in commodity prices of a magnitude that has not been seen since 2007. Price of brent crude oil, which was USD 50 per barrel in early 2007, climbed to USD 145 within one and a half year. Then, parallel to the deepening global crisis in late 2008, crude oil prices went back to USD 35; and now it is hovering around USD 125. And the uncertainties about oil prices, resulting from demand and supply-side developments, and their potential effects keep the policymakers interest in commodity prices alive in the current economic outlook. As they are among the risk factors that affect the inflation outlook, we directly referred to commodity prices, mostly to those of crude oil and food, in our latest inflation reports. As a matter of fact, nearly half of the revisions about official inflation forecasts published in our inflation reports in the last couple of years originated from the changes in our assumptions about food and commodity prices. This suggests that the rise in commodity prices may bring about challenges for central banks not only in terms of direct pressures on inflation.
A widening of the deficit is more likely when growth in tax revenues is constrained by the slow rate of economic growth. Spending rules can be viewed as a remedy for the problem of coordination between competing interests. In addition the formulation of the rules requires the setting of spending priorities. For example, it would be reasonable for an expenditure rule to give priority to capital expenditures, while another rule prioritizes the various types of social spending. The choice of the rules will involve the difficult task of setting of priorities, but once the rules are determined, there will be considerably less discretion on the overall fiscal outcome of the yearly budgetary exercise. For example, to remain within the rule, spending cuts may be necessary in some areas to allow a larger outlay in a higher priority area. This kind of tradeoff is an essential feature of budgetary management. Expenditure rules are also helpful for the purpose of assuring long-term budget sustainability. In this regard, the reform of the pensions system requires particular consideration. As things stand, the gap between pension contributions and benefits is of concern. The Financial Estimates for 2012 include an amount paid by government to top up the contributions of employers and employees in the private sector. While such an arrangement was understandable in the early phase of Malta’s economic development, it is less justified today.

Thus, in terms of labour cost competitiveness, Malta has kept pace with the euro area average. However, to maintain competitiveness a further focus on the wage setting process may be appropriate. In particular the basic principle must be to emphasise that productivity improvements are at the basis of sustained wage increases, and that these are best negotiated at firm level, where improvements in productivity can be best gauged. Consequently, any cost of living adjustments should form part and parcel of the collective agreement and not be superimposed on collective agreements by legislation as happens today. Indeed, already a number of collective agreements incorporate the COLA increase, and I suggest that this should be the norm. Another important message that has emerged from the sovereign debt crisis is the need for fiscal prudence, which provides the space for countercyclical fiscal policy during a downturn. In the euro area, fiscal policy is the major macroeconomic management tool at the national level. Thus, in periods when economic activity is relatively strong, policy needs to be sufficiently prudent to build the necessary fiscal buffers that would be utilized during periods of weaker growth. BIS central bankers’ speeches  5  In the aftermath of one-off expenditure during 2008, the deficit ratio in Malta declined in 2009 despite the recession of that year and narrowed slightly further in 2010. The debt ratio generally declined until 2008, but then picked up in 2009, partly in response to the contraction in the economy.
The Riksbank’s mandate remains unchanged. We shall continue to safeguard financial stability. We shall therefore continue to analyse and oversee the financial system, to inform and warn of risks and to make recommendations regarding measures to take. As I mentioned earlier, financial stability is also an important condition for monetary policy to function. The new framework also entailed establishing a forum for representatives of the Government, Finansinspektionen, the Swedish National Debt Office and the Riksbank to meet and discuss questions of financial stability, what is known as the Financial Stability Council. The Council meets regularly, normally twice a year, and the information provided and discussions held at these meetings are publicised in the form of minutes no later than two weeks after the meetings. The meetings give us the possibility to discuss how the policy areas interact and what types of measure are needed to avoid new financial crises as far as possible. The authorities represented on the Council then make decisions independently within their fields of responsibility, as to which measures should be taken. Figure 12 illustrates the new framework for macroprudential policy in Sweden. This spring’s work in the Council – focus on capital requirements We have so far had two meetings of the Financial Stability Council. The first, inaugural meeting was held in February, and we noted there that there was a need for further measures to reinforce financial stability. At the end of May the first real meeting was held, and we were able to conduct a more in-depth, concrete discussion.

New framework for macroprudential policy  Source: The Riksbank  BIS central bankers’ speeches  15