samchain/econo-pairs-v1 huggingface dataset:
Chart A1: Wage growth decomposition based on simple wage Phillips curve (7) 8 6  2 0  Per cent  4  -2  20  Unexplained Unemployment  Recruitment difficulties Lagged wage growth  -4  2015  2014  2013  2012  2011  2010  2009  2008  2007  2006  2005  -6 2004  2003  2002  2001  Productivity CPI inflation Data  BIS central bankers’ speeches  References Bernanke, B, Gertler, M and Watson, M (1997), “Systematic Monetary Policy and the Effects of Oil Price Shocks,” Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91–157. Brainard, W (1967), “Uncertainty and the Effectiveness of Policy”, American Economic Review Papers and Proceedings, 57, 411–425. Broadbent, B (2013), “Conditional guidance as a response to supply uncertainty”, speech at the London Business School, Regents Park, September. Broadbent (2015a), “Compositional shifts in the labour market”, speech at ‘Understanding the Great Recession: from micro to macro’ Conference, Bank of England, September. Broadbent (2015b), “The MPC’s forecasts and the yield curve: predictions versus promises”, speech at Reuters, Canary Wharf, November. Burgess, S, Fernandez-Corugedo, E, Groth, C, Harrison, R, Monti, F, Theodoridis, K and Waldron, M (2013), “The Bank of England’s forecasting platform: COMPASS, MAPS, EASE and the suite of models”, Bank of England working paper No. 471, May. Carney, M (2010), “Living with low for long”, remarks at the Economic Club of Canada, Toronto, December.

2  BIS central bankers’ speeches  The adaptation of the Spanish economy to the euro was incomplete Turning now to the Spanish economy, our adaptation to the new rules of play derived from, or imposed by, monetary union has been insufficient and belated. Our membership of the euro area compelled us to desist from long-established practices among economic agents who regarded exchange rate devaluation as the “normal” means of resolving the problems of competitiveness caused by inflation and did not consider fiscal discipline as vital for maintaining economic growth. True, in the years before we joined the euro area, we took steps to adjust economic policy rules to a low-inflation environment and set in train some reforms so it would function more flexibly. Two factors were particularly important in achieving this goal. First, the anchoring of inflation expectations, which required fulfilment of the price stability convergence criteria. And second, in the area of budgetary policy, the enactment in 2011 of an initial Stability Law laying the foundations for preventing excessive budget deficits. The transition to Monetary Union was also easier because the peseta/euro conversion rate agreed in 1999 was quite competitive as a result of the devaluations which had taken place between 1992 and 1995 during the functioning of the European Monetary System. However, those devaluations were a clear sign of the difficulties awaiting countries that make exchange rate commitments if these are not accompanied by price and cost discipline.
BIS Review 85/2010  3  4  BIS Review 85/2010  BIS Review 85/2010  5

On 17 September, American International Group (AIG), the largest US insurance company, had to rely on an emergency loan from the Federal Reserve. The company played a key role in the credit default insurance market. The financial crisis has heightened in several European countries. Banks in Belgium, Denmark, France, the Netherlands, the UK, Sweden and Germany have been taken over by the government or other financial institutions. In Iceland, the authorities took over the three largest banks and are now unwinding their international operations. The crisis at these banks prompted a flight from Iceland’s national currency which, combined with a property market crash, has triggered a sharp recession. In Norway, the effects of the financial crisis have also occurred more rapidly and become more pronounced than the outlook seemed to imply only recently. Norway is still in a better position than most countries. Capacity utilisation in the Norwegian economy has been very high. The surplus on current account is considerable and government finances are solid. Norwegian banks have limited exposures to international securities. They have suffered only small losses and recorded solid earnings in recent years. Furthermore, the Norwegian banking system is not large relative to the size of the Norwegian economy. In response to the uncertain environment, banks abroad and at home are reluctant to lend to each other and are tightening their credit standards. Credit channels are drying up. Money market rates have increased markedly, and to levels substantially higher than central bank key rates.
Other policy makers have faced similar challenges, and have found highly innovative and effective ways to overcome them, such as the Treasury’s furlough scheme. And of course the intellectual challenges faced by economic policy makers have been tiny compared with the very substantial challenges faced by the healthcare and other key workers who have had to tackle the Covid pandemic itself, as well as those who have suffered from the disease. My previous Strand Group lecture, “The First 50 years of the Government Economic Service”, touched on some of that earlier experience. 2 My MPC colleague Silvana Tenreyro made a similar observation in her 2018 speech on models in macroeconomics. 3 Or to give the quote from Korzybski (1933) more fully: “A map is not the territory it represents, but, if correct, it has a similar structure to the territory, which accounts for its usefulness”. 4 It’s not for nothing that the Bank of England’s central forecasting model is known as COMPASS. 1  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  Figure 1: The MPC’s approach to its forecasts has evolved during the pandemic  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  An evolving approach to the outlook  The MPC, supported by the efforts of Bank of England staff, has continued to make use of forecasts throughout the Covid period.

At the outset of the financial crisis, the private balance, which was negative, swung sharply into surplus, and this was largely accommodated by a decrease in the public balance–in other words, an increase in the government deficit. Recently, 3 this accounting identity looked roughly like this: 6.5% of GDP private balance + (–9.5% of GDP) public balance = –3% of GDP current account balance Realistically, the public balance 4 needs to be reduced to about –3 percent of GDP over the next five years or so for the ratio of federal debt held by the public-to-GDP to stabilize around 75 percent to 80 percent of GDP. One might reasonably do more, but this just strikes me as the minimum adjustment that would be prudent and sustainable. This requires a large change from where we are today. For the accounting identity to continue to hold, which it must, there needs to be sizable shifts in the private balance and/or the current account balance. This is not a policy choice – it is basic math – but policy choices can help ensure that the adjustments take place in a way that is supportive of economic activity. The private balance can be further divided into two pieces–the household balance and the business balance. Currently, for the United States, the household balance is about 2.5 percent of GDP and the business balance is about 4 percent of GDP.
All these underpinnings shape what we are, namely Asia’s leading international financial centre (IFC), asset management centre and risk management centre. And it’s also this broad-based leadership that makes Hong Kong well placed to help the Mainland achieve the objective of promoting RMB internationalisation, while at the same time further reinforces our status as an IFC in the process. This is precisely the mutualism I just referred to. 8. At this point it’s worthwhile to first take stock of where we stand as an offshore RMB hub: • We have the largest offshore RMB pool of over RMB800 billion, providing liquidity support to globa Hong Kong is a trade settlement hub, processing RMB6.3 trillion in 2020, up 18% from 2019, and c to date. •  •  •  Hong Kong continues to maintain its top position in offshore RMB FX trading, with an average daily t in April 2019 according to the latest BIS Triennial Survey. This is equivalent to 30% of global trad Mainland. The city has maintained its leading position for RMB SW IFT payments, with more than 70% of glob processed through Hong Kong. The dim sum bond regained momentum in the recent few years after a slowdown in issuance arou witnessed encouraging developments over the past few years, such as with the regular bond and bill of Finance and the People’s Bank of China (PBoC). The upcoming issuance by Shenzhen municipal g yet another new category of Mainland issuers. Time to give internationalisation another push 9.

With the introduction of the Stock and Bond Connects, the cross-boundary infrastructure linkages between the clearing houses of the two markets have become the critical foundation on which cross-boundary transactions can be efficiently cleared and settled. The Central Moneymarkets Unit (CMU) operated by the HKMA is now linked to the Mainland central securities depositories (CSDs) on the one hand and the international CSDs (ICSDs) on the other. We have embarked on a multi-year enhancement programme to modernise the system to enable CMU to perform all functions required of an ICSD. Operating window will be expanded; a wider spectrum of corporate action services will be offered; and the system will enable the CMU to directly provide collateralised lending and FX services to nonbank participants. 19. Apart from these three factors, i.e. liquidity, product and infrastructure, which are essential to building a vibrant RMB offshore market in Hong Kong, I should add that supervisory collaboration is also important in this gradual opening-up process. Many of the initiatives to promote the international use of RMB will involve the opening up of the Mainland’s capital accounts. This must be done in a gradual and risk-controlled manner, which is why you often see quota and eligibility criteria in the initial stage of the Connect schemes. This kind of risk-control features requires the close collaboration between the HKMA and our Mainland counterparts. Through such collaboration, we seek to ensure that Hong Kong is a safe and reliable platform to take forward these new cross-boundary initiatives. 20.
Institutional change supported the role of the dollar, with the creation of the Federal Reserve System providing, for the first time, a market-maker and liquidity manager in US dollar acceptances. This was particularly helpful for promoting the use of the dollar in trade credit, reinforcing its use as a means of payment and invoicing currency. Yet the US was, at least at first, an unwilling hegemon. Under the gold standard, the Fed’s absorption of gold inflows exported significant deflationary pressures to the rest of the world.38 Europe was dependent on the recycling of capital flows by the US, which lent much of its surplus back to Europe to enable payments of war reparations and debt. Europe suffered severely when this stopped in 1928. Moreover, the increase in price levels that occurred as a result of the First World War left the global economy with too little gold in total to sustain money supply at the level consistent with full employment. Supplementing gold reserves with foreign exchange to boost money supply led to competition between the UK and the US to provide that service to other countries. The resulting world with two competing providers of reserve currencies served to destabilise the international monetary system, and, some would argue, the lack of coordination between monetary policy makers during this time contributed to the global scarcity in liquidity and worsened the severity of the Great Depression.39 The experience of the interwar period is a cautionary tale.

[This is made more challenging by the increasing weight of EMEs in the global economy, and the declining share of the US, which means demand for US-denominated safe assets is likely rise faster than their supply.] 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9  In theory, the increases in both DCP and capital flows at risk suggest a greater focus on targeting the bilateral exchange rate against the dollar (through adding terms involving terms of trade misalignments and deviations from the law of one price to central banks’ monetary policy objective functions, and tools such as capital flow management measures (“CFM”)).26 In practice, either could be highly destabilising. It is far better as a first response to focus on core price stability objectives, and to explain transparently if foreign shocks are altering the trade-off required to best achieve it. Monetary policy makers’ mandates are necessarily parsimonious, focusing on a small set of macroeconomic variables – price stability and maintaining output around potential. While some shocks drive inflation and output in the same direction, others push inflation away from target without proportional effects on activity, confronting monetary policymakers with a trade-off between these two objectives.
Chart 6: Financial market implied measures of inflation expectations US (5yr5yr from swaps) EA (5yr5yr from swaps) UK (5yr5yr from swaps)  Per cent  Japan (1yr forward rate to 2018 from index linked bonds)  4.0 3.0 2.0 1.0 0.0 -1.0  2008  2009  2010  2011  2012  2013  2014  -2.0  Source: Bloomberg and Bank calculations. Notes: The UK line is adjusted down by 1pp to take account of the RPI-CPI wedge. As there are very few index linked bonds for Japan, the 1 year forward inflation rate in 2018 is shown as a rough proxy. BIS central bankers’ speeches  19  Chart 7: Probability of a high-impact event in the UK financial system Net percentage balances Short term  Medium term  40 30 20 10 0 -10 -20  Very high  2013 H2 2013 H1 2012 H2 2012 H1 2011 H2 2011 H1 2010 H2 2010 H1 2009 H2 2009 H1 2008  2014 H2 2014 H1 2013 H2 2013 H1 2012 H2 2012 H1 2011 H2 2011 H1 2010 H2 2010 H1 2009 H2 2009 H1 2008 High  Low  Very low  -30  Net  Sources: Bank of England Systemic Risk Survey and Bank calculations. Notes: Respondents were asked for the probability of a high-impact event in the UK financial system in the short and medium term. From the 2009 H2 survey onwards, short term was defined as 0–12 months and medium term as 1–3 years.

Wang, Mei, Marc Oliver Rieger and Thorsten Hens (2011), ‘How time preferences differ: Evidence from 45 countries’, NHH Discussion paper, FOR 18. 16  BIS central bankers’ speeches  Appendix Chart 1: Equity market volatility and CDS premia for major UK banks Basis points 350  Average 5yr CDS for UK banks (RHS)  90  VIX (LHS)  80  300  70  250  60 50  200  40  150  30  100  20  50  10 0 2003  2005  2007  2009  2011  0  2013  Source: Bloomberg. Notes: Equity market volatility is shown using the US VIX index. Major UK banks include: Standard Chartered, Santander UK, RBS, Barclays, LBG, HBOS, and HSBC. Chart 2: Household views of the Bank of England’s 2% inflation target is too high  or too low  or about right Percentages of respondents  70 60 50 40 30 20 10  1999  2001  2003  2005  2007  2009  2011  2013  0  Source: Quarterly Bank of England GfK/NOP Inflation Attitudes survey. Notes: Respondents were asked the following question “The Government has set an inflation target of 2%. Do you think this target is too high, too low or about right?”. Respondents who answered “no idea” are not shown on the chart. On average, around 14% of respondents answer in this way. Data are to 2014Q3.
Wellfunctioning money markets provide the basis for determining reference rates, which perform a key informational function for the economy as whole. The pricing of a broad array of financial products – particularly in the capital and derivatives markets – is based on reference rates. They are also used in credit and mortgage transactions and many other types of contracts. Reference rates can only be credible and robust in the long run if the underlying market functions well. The crucial importance of sound reference rates for an orderly functioning of financial markets cannot be over-stated. We now turn to a discussion of some of the changes in the landscape of reference rates in Switzerland. The role of SARON – the reference rate for Swiss franc financial markets The Global Financial Crisis greatly accelerated the shift in the interbank money market from the unsecured segment to the repo market. As unsecured activity dwindled, the Swiss franc Libor, for decades the benchmark for Swiss financial markets, lost reliability and robustness. The alternative to Libor is SARON. Today, SARON is the most representative interest rate on the Swiss franc money market. SARON is a secured overnight rate and reflects conditions in the most liquid segment of the Swiss franc money market. Unlike the Libor fixing rate, it is  Page 4/13  calculated on the basis of actual transactions and binding quotes. Approximately 150 financial institutions have direct access to this market. SARON has existed since 2009 and its economic importance has grown significantly in recent years.

At a global level, the buoyancy of EMEs has resulted in higher commodity prices, which coupled with some specific factors, such as weather problems impacting agricultural production and tensions in the Middle East and North Africa, have pushed food prices to record highs and oil prices to very high levels as well. This price shock, coupled with strong domestic activity, results in inflationary pressures that must be contained with tighter monetary policy. Contrary to the situation in advanced economies, international price (supply) shocks find fertile territory to propagate to wages or other prices when the economy is in a strong cyclical position. BIS central bankers’ speeches  1  This uneven recovery of the world economy is resulting in an uneven monetary policy landscape (Figure 2), which strengthens currencies in EMEs and induces capital inflows to these countries. Free trade and export-led growth have been a successful growth strategy in developing countries, which see the strengthening of their currencies as a threat to this strategy. Consequently, many countries have been trying to fight the appreciation via capital controls and exchange rate intervention. China and the U.S. deserve special mention, as they are at the center of the tensions of the adjustment. China has been the growth engine of the world, and it would not be an exaggeration to call it the “grower of last resort” for the global economy. They have decided to appreciate gradually, much more slowly than most EMEs and commodity exporters.
The lessons about the need to maintain a solid financial system and the capacity to apply countercyclical policies have been critical in this performance. At the same time, they serve as a solid foundation for a steady recovery. There are many tasks ahead of us, in particular to reinforce Chile’s growth capacity, but our macroeconomic fundamentals are consolidated. However, the horizon is not completely clear. Although risks are more limited than they were a few quarters ago, vulnerabilities remain. The financial systems of developed economies remain weak. World growth forecasts point to a slow recovery and the world will hardly regain the growth rates of 2006-2007 in the coming years. A proper conduct of economic policies should provide the support for such recovery. Adding to the problems still present in the financial systems and the level of private sector indebtedness, the fiscal situation of many industrialized economies, which met the crisis with already fragile positions, leaves several questions open. Global imbalances are not a problem today, because the drop in demand has taken part of the adjustment, but as the world economy picks up they could become a threat again. Finally, we have seen an optimistic attitude in international stock exchanges. They anticipate a healthy recovery, but if wrong they might result in asset revaluations that could pave the way for new uncertainties. The role of the Central Bank of Chile is to monitor all these risks and their implications on the monetary stance, in order to regulate it in consistency with its inflationary objective.

Yugoslavia, Mexico and Egypt had the advantage of being close to the critical export markets in the developed world. Honduras and Tanzania had precious metal deposits, as did several of the other Latin American and African countries. Singapore had nothing, was over-populated and had high unemployment. Many economists of the day predicted that countries in Latin America and Africa would outgrow over-populated, resource-scarce Asia. The outcome, however, was totally different. Living standards have barely risen in Honduras in the last 40 years, and have declined in Tanzania. Tito's Yugoslavia no longer exists. East Pakistan fought a war with West Pakistan and separated to become Bangladesh. Civil war and internal disorder tore up countries like Liberia, Ethiopia and Uganda. Singapore which was written off by pundits as being not viable without the Malaysian hinterland not only survived but thrived. Its GDP per capita increased more than six-fold, better than any of the other 15 countries represented in my class. Why have the growth experiences of individual countries been so disparate? Some of you might have watched the movie, "The Good, the Bad, and the Ugly", released, coincidentally, exactly 40 years ago. Set during the American Civil War, it was about three bandits who each held one clue to a hidden trove of gold coins. They did not trust each other, and wanted all the money for themselves. In the end, the "Good" bandit who put all the three clues together won.