samchain/econo-pairs-v1 huggingface dataset:
My purpose today is to put the case for continued separation, albeit within the single Bank of England. I think the interactions between the two policies are often overstated, particularly in small open economies like the UK. Domestic interest rates have a smaller effect on financial stability, and financial policy a less significant impact on demand and inflation, than sometimes suggested. And whatever the benefits of formal co-ordination, a full merger could compromise accountability. The risk is that a single committee would pay too much attention to its more verifiable objectives – the cyclical stabilisation of inflation and growth, currently allocated in the main to the monetary policymaker – and too little to financial stability. 1 2  Fernie and Metcalf (1999), Groves et al (1994). The key reference in the economics literature is Holmstrom and Milgrom (1991). 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  I should say before I start that nothing I say here is very novel. Others, including my predecessor Charlie Bean and the economist Lars Svensson, have made similar points about the interaction of monetary and macro-prudential policy3. I discovered when writing the talk that my former colleague Paul Tucker made very similar arguments regarding accountability back in 20114. FPC external member Donald Kohn gave a talk on this topic only a few months ago. There is, more generally, a substantial and growing literature on the governance of macro-prudential policy and its interaction with monetary policy.

If that’s been true at all over the past couple of decades, however, it’s a much more accurate description of the pre-crisis economy, when interest rates were significantly higher, than of the years since. Currently, house prices, equity prices and mortgage lending are all still materially lower, when measured in real terms, than they were a decade ago (in fact, this has been the first ten-year period since the second world war in which the real stock of mortgage lending has declined in the UK.) So if there had been a macroprudential authority throughout the past twenty years its policies would presumably have been a lot tighter in  economy with low inflation and rapid credit growth, a single policymaker might well choose such a policy setting. It’s generally the case that, as long as there are at least as many objectives as policy instruments, and when there can be independent shocks to those objectives, the policy instruments will occasionally move contrariwise, whatever the arrangements for setting them. For example, the same would be true in an economy with a weak economy but an undesirably high public-sector deficit – the right reaction, even for a single decision maker, could well be to set tight fiscal policy but loose monetary policy (see Kohn (2017) on this point). 7 Differences in objectives also drive many results concerning fiscal and monetary policy coordination. The literature is significant and diverse. But one strand (e.g.
“Papa Bear” - Inflation Let me start with “papa bear” inflation. On conventional wisdom, he should be making an appearance by now. Historically, inflation comes from high wage growth in a tight labour market during the late stages of the business cycle – a relationship economists describe as the Phillips Curve. Cyclical conditions are now tight in major economies, especially in the US. US unemployment rate has fallen to 4.1%, well below the Fed’s estimated Non2/7  BIS central bankers' speeches  Accelerating Inflation Rate of Unemployment (NAIRU) of 4.6%. Yet, wage growth has remained at around 2.5%, below the pre-crisis average of 3.5%. Whenever central bankers gather these days, this phenomenon of “missing inflation” is often the main topic of discussion. Many wonder whether the Philips Curve has permanently flattened – meaning whether the negative relationship between the unemployment rate and wage growth has fundamentally weakened. Some even ask if the Philips Curve is dead – if the relationship no longer exists. Why has “papa bear” inflation been missing to-date? The first and simplest explanation is that the headline measure of unemployment may be understating the level of slack in the economy. In the US, the IMF estimates that the output gap between actual and potential GDP has only just closed. The output gaps in the EU and Japan are still some way off from closing. There may also be quite some slack in the labour market that may not be fully apparent.

Eddie Yue: Opening remarks at the commencement event of e-HKD Pilot Programme Opening remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at the commencement event of e-HKD Pilot Programme, Hong Kong, 18 May 2023. *** Good afternoon, everyone. A very warm welcome to all of you for joining today's commencement of the e-HKD Pilot Programme, especially to those of you flying from other parts of the world. Central bank digital currency, or CBDC, is one of the hottest topics in the central banking community today. Over a hundred central banks are studying it and a few dozens of them are working on various types of pilot trials. The HKMA has been researching and piloting on CBDC since 2017. Apart from the exciting work that we are doing with our three partner central banks on the application of wholesale CBDC under Project mBridge, the HKMA has also been exploring the prospect of issuing retail CBDC, or e-HKD, in Hong Kong. e-HKD is Beyond Technology We conducted two rounds of market consultation in the past two years. Overall, the respondents are supportive of the e-HKD initiative and believe that e-HKD has the potential to make payments faster and more efficient while supporting the digital economy. However, we are cognizant of the fact that e-HKD is not and should not be merely a technology project.
This flexibility in the labour market could apply both to increased variability in nominal wage increases and to increased professional and geographical mobility of the labour force. BIS Review 70/2002  3  Potential gains from euro membership So far I have concentrated on some of the disadvantages of joining Monetary Union. But let there be no mistake, there will certainly be important gains from EMU for Sweden. While large Swedish corporations already enjoy many of the advantages of using the euro, being already well integrated into the European market, joining the euro area may be essential for small and medium sized enterprises, which are too small to use advanced methods of handling exchange rate volatility. A recent survey revealed that 80 percent of the larger corporations in Sweden already invoice in euros, compared to only 15 percent of the small and medium-sized enterprises. Our overall macroeconomic models do not always capture the strength of these microeconomic forces at play at company level when transaction costs are reduced and barriers for trade and investment lowered. Some of the recent research, such as the gravitation models presented by Professor Andrew K. Rose and others, which compare wide sets of countries, give very significant increases in trade and growth from currency unions. Similarly, comparisons of the remarkably high price differentials between comparable and neighbouring areas in the US and Canada indicate that the existence of price transparency affects prices.

Today we focus very much on the price increases on some services after the introduction of euro coins and notes, but let us bear in mind that prices on durable goods that are more subject to cross border comparisons, have indeed increased less than the average or even decreased. There are already signs of a convergence of prices on such durables and there is also area-wide euro pricing from some firms, which reflects increased price competition across borders. To conclude, the Monetary union presents an attractive proposition for Sweden, given that we continue to improve the functioning of wage formation and labour markets and that we ensure a solid institutional foundation for fiscal policy to stabilise the economy. The same could in fact be said about the euro area countries: With structural reforms and more solid foundations for fiscal policy, the present EMU-countries would have much better possibilities for employment growth and productivity gains. Monetary Union is putting pressure on both industry and politicians to improve their performance in the years to come. 4  BIS Review 70/2002
In addition, it needs to be concerned with whether vulnerable groups face increased risks of financial exclusion. This is particularly important in a rapidly changing financial and social landscape. Sophisticated risk-profiling methods employed by financial institutions can make it more difficult for deserving individuals and small businesses to qualify for financial services. Aggressive marketing practices by financial institutions and more complex financial products can also lead to poor financial decisions. The way in which financial services is delivered to consumers is also moving towards more cost-efficient channels that reduce the need for face-to-face contact, except for high net worth customers. Enquiries and complaints are handled largely by phone or e-mail, and usually in a fragmented manner by different parts of a financial institution. This can mean less effective advisory support for vulnerable groups of financial consumers. While the wider adoption of electronic channels has enormous potential to increase financial inclusion, also needed is to ensure access to the relevant technology, in order to avoid being disadvantaged from using alternative channels that will become relatively more costly. A delicate balance therefore needs to be achieved in developing solutions that will allow the financial system to grow and innovate in support of the economy, but without widening the divide in our economy. The role of non-bank financial institutions In many of our countries, non-bank financial institutions are being envisaged for a greater role in increasing financial inclusion and thus to contribute to sustainable economic and social development.

For some time now, particularly after the global financial crisis, stronger regulation and balance sheet constraints of the banking sector have also led to the rapid expansion of non-bank credit. For the most part, however, this expansion has not been  2  BIS central bankers’ speeches  well-managed, resulting in growing concerns with over-indebtedness in many parts of the world. One response has been to strengthen the regulation of such institutions, and reduce the inconsistencies in prudential and conduct standards that apply between banks and non-banks. Another has been to capture better information on the activities of non-banks as a basis to inform more targeted policy measures. The question of how to evolve the role of non-bank financial institutions to continue to contribute in sustainable way to financial inclusion is a complex one. While we can agree that a different approach to regulation from that applied to banks is justified, it cannot be at the expense of protection for financial consumers, and risks to financial stability. This middle ground is what is needed, taking into account the specific context of our own economies. The role of financial education Another important strategy for financial inclusion is the enhanced role of financial education. This is not only to encourage greater participation in the mainstream financial system, but also to keep individuals already in the mainstream from being financially excluded in future as a result of changes in the financial landscape.
The aim is to mobilise the EUR 390 billion savings surplus of the euro area last year, notably to shore up equity which is the key to an innovation economy, and also to foster synergies, thanks to an integrated steering mechanism, between the Juncker investment Plan, the Capital Markets Union and Banking Union. The fiscal accelerator could be a euro area investment budget used to finance, for the benefit of all countries, certain “European common goods” such as digital technology, energy transition, security, and migration controls. If there is such progress on substance, in terms of institutions, we would need a euro area Finance Minister, President of the Eurogroup and member of the Commission, backed by a European Treasury; but also a euro area Parliament group, in order to ensure the democratic legitimacy of the institutions and decisions. [slide 15]  *** France is heading in the right direction and at a fast pace, with a strong government commitment to reforms. I stress it as fully independent Central Banker. France is changing for the best. But France is not alone obviously. The European and international environments need to remain supportive. In terms of economic upturn first, but also in institutional terms. A country cannot implement the appropriate structural reforms, improve its flexibility and attractiveness and then face a major disruption in international trade, reducing the pay-offs of such a political effort.

If we want to preserve the present global expansion, if we want to encourage reforms and hence increase potential growth, we need to maintain an open international environment, a rule-based multilateral order. [slide 16] I stress it here in the United States, as a dedicated European speaking to close historical allies: we have many common challenges, politically and economically. To avoid disaster, we should resolutely build common solutions. Believe me: France is taking its part of the task, today more than ever. 4/4  BIS central bankers' speeches
In its place, the health and education sectors have emerged as important sources of job opportunity and economic development potential. These sectors have provided stability to the region through the recession and recovery. The recent announcement of Governor Cuomo’s $ billion economic development pledge to the region is another positive development. This commitment represents a tremendous opportunity for the region to accelerate the economic transformation already underway. Therefore, it is important for the community to think strategically about how best to use these funds to leverage the region’s existing strengths. Buffalo’s colleges and universities deserve special attention within this strategy. Not only do these institutions produce highly skilled labor, they also promote innovation by creating new knowledge and inventions through academic research and development. It can be especially beneficial for local businesses to take advantage of both the knowledge created and the availability of research facilities at local colleges and universities. Partnerships between private industry and higher-education institutions are an important ingredient in this regard. Going forward, I believe these partnerships will become more important than ever – particularly for places like Buffalo that continue to undergo economic restructuring. Fortunately, the region has a strong higher education sector in place. Conclusion To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established.

In facing them, we need a visionary industry and creative solutions that will lift our economic potential and improve lives of our people. Such solutions must be built on the strongest foundations the strength of our technical capability, our financial strength and our uncompromising stance towards professional ethics and standards. With these foundations firmly in place, the industry can bridge new horizons and expand beyond traditional borders. BIS central bankers’ speeches  5
First, the need for further convergence in real and nominal terms, second, the need to advance on the compliance with the Treaty in the field of central bank and other relevant legislation and, third, the need to strengthen the financial and banking sectors. In addition, I would like to finish my presentation by briefly recalling how the entry of new Member States into the euro area is likely to impact the monetary policy of the ECB. Advancing convergence in real and nominal terms Advancing real and nominal convergence with the euro area in a parallel manner should take top place on the agendas of accession countries' policy-makers. This means that the need to catch-up with the EU in terms of both the real economy structures and income levels and the need to advance disinflation should be pursued as a "dual track". Let me explain why I like to stress the need for this parallelism. Very often, higher inflation rates in accession countries have been partly explained by their need to catch-up with the real income and price levels prevailing in the euro area. This empirical phenomenon has been observed in many fast-growing economies and is often referred to as the BalassaSamuelson effect. Although the magnitude of this effect and, thus, its impact on inflation is difficult to quantify, most empirical studies for the accession countries have estimated it at around 1 to 3 percentage points of inflation. For monetary policy, this has a double meaning.

ISBN: 9780691242248. Frait, J. (2023, 17 March). Monetary Macroeconomics and Central Banks in Turbulent Times [lecture transcript]. Czech National Bank. Kunert, J. (2017). eské banky musí býti konen oporou a prkopníkem eského vývoje hospodáského. [Czech banks must finally be the backbone and pioneers of Czech economic development] Bankovnictví 2017, No. 8, 10–15. Mandel, M. and Dvoák, P. (2021). Co nás eká s rostoucím státním dluhem? [What awaits us with rising government debt?] Bankovnictví 2021, No. 6, 38–41. ISSN 12124273. Michl, A. (2019a). Banky by mly zvednout úroky u vklad [Banks should raise interest on deposits]. Mladá fronta DNES, 17 January 2019, p. 11, Interview section. Michl, A. (2019b). Ten years later: Lessons for DSGE builders and Czech policy makers (external link). Review of Economic Perspectives, 19(3), 159–174. Michl, A. (2022, 23 October). Governor's opening remarks at the CNB Discussion Forum [Audiovisual recording]. Czech National Bank. Michl, A. (2023). The road to the target. Discussion on "Inflation: The road to the target" University of Economics and Business, Prague, 15 May 2023. Rajan, R. (2023). Less is more (external link). Finance and Development Magazine, March 2023, 11–14. 1 CNB Archive, Živnostenská banka archive, ŽB/1777/3, Minutes of the Board of  Directors' meeting of 14 March 1934, Report by Dr. Jaroslav Preiss for the Board of Directors' meeting, p. 3, cat. no. 1777. 6/6  BIS - Central bankers' speeches
But indexation, combined with a failure to anchor inflation expectations, would lessen the effectiveness of monetary policy and lead to greater fluctuations in interest rates, economic activity and employment. We are therefore convinced that allowing higher inflation rates would be the wrong lesson to draw from the crisis. Price stability, i.e. neither inflation nor deflation, is a key public good. It is a decisive factor in achieving sustainable economic growth and prosperity, and not least social stability. Switzerland has had a long and positive experience with low inflation and low nominal interest rates. The SNB is, and will remain, committed to price stability. Its monetary policy strategy gives it the necessary leeway to act decisively against both inflation and deflation. VI. Conclusion  Ladies and Gentlemen, the worst of the financial and economic crisis that erupted in summer 2007 is now behind us. But we will be dealing with the fallout for some time to come. Hopefully, the Swiss economy will return to a sustainable growth trajectory. Until then, the SNB will continue to face major challenges. The Governing Board will approach them with great respect, but also with confidence and conviction. To achieve this, we will once again need to count on the exceptional efforts of each and every SNB staff member. We thank our shareholders for their continuing support and for their interest in the activities of the SNB. BIS Review 59/2010  5

In other words, central banks have to be prepared to adjust policy when past asset price increases could be a significant factor putting upward pressure on aggregate demand, as well as when past declines threaten to reduce output relative to potential. Although the potential case for adjusting policy applies in both directions, the implications for policy may differ. Because some asset prices may fall more abruptly than they rise, and because the effects of downward moves in asset prices on demand may be larger due to the greater negative impact of deflation on the net worth of borrowers—witness the United States in the 1930s or Japan in the 1990s, the case for adjusting monetary policy in response to negative asset price shocks is commonly considered more compelling than in the alternative context. But this does not mean that monetary policy should generally ignore the effects of increases and only respond to observed declines in asset prices. The test should be the size and circumstances of the asset price moves and their impact on the forecast relative to the central banks’ objectives, not the direction of the asset price move. Different considerations apply in the circumstances where the central bank is considering how a potential future move in asset prices may affect the forecast. These circumstances call for even greater caution and care.