samchain/econo-pairs-v1 huggingface dataset:
26  Ashraf and Galor (2013), Ager and Bruckner (2013), Bellini et al (2013), Alesina et al (2015). 27  Alesina et al (2015). 28  Kahneman (2012). 29  For example, Haldane (2014). 30  Acemoglu and Robinson (2013). 6  BIS central bankers’ speeches  errors, by leaning against the eccentricities of individuals and the groupthink of crowds. 31 Decision-making diversity makes for greater systemic resilience. Such diverse perspectives have also been found to improve our powers of clairvoyance. In his recent book “Super-Forecasting”, Philip Tetlock explores what makes for a good forecast, based on experimental and real-world experience. 32 A set of forecasters with diverse perspectives, experiences and ideas is found to be a key ingredient. Indeed, teams of diverse amateurs have been shown to out-perform experts in some settings. In other words, there is forecasting wisdom in crowds, provided they are cognitively diverse. Over time, these insights have found their way into institutional design. For example, diverse decision-making underlies judicial practices in many countries – for example, the design of the US Supreme Court. 33 It is also embodied in the design of the Bank of England’s policy committees – the Monetary Policy Committee (MPC), Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC). Each comprises internal and external members, individually accountable and drawn from diverse backgrounds. 34 The global financial crisis provides the example, par excellence, of the resilience benefits of diversity. A lack of intellectual diversity sowed the seeds of the crisis.

By taking a small step towards the normalisation of the short-term interest rate level, we are thus gradually and cautiously siphoning off excess liquidity in order not to jeopardise price stability in the long term either. Financial markets Is the economic analysis on which our inflation forecast rests in conformity with that of the financial markets? In the recent past, a flattening of the interest rate curve was observed in Switzerland. Interest rates for maturities of up to ten years in particular moved up. This shows that the financial markets have anticipated a somewhat less expansionary monetary policy. Since economic activity  2  BIS Review 39/2004  began to pick up momentum more rapidly in Switzerland than in the neighbouring countries, it became evident that interest rates would rise sooner, which enhanced the attractiveness of the Swiss franc somewhat. Nevertheless, the competitiveness of Swiss companies remains intact. At the very long end of the interest rate curve interest rates have hardly moved, an indication of consistently low inflation expectations. The markets assume that the National Bank’s monetary policy is in conformity with its goal of ensuring price stability in the long term. Monetary policy still expansionary In March 2001, we initiated a series of interest rate reductions in response to the sluggish business climate and the enduring strength of the Swiss franc. In a particularly difficult international environment with deflationary trends we allowed the three-month Libor to finally fall to a historic low of 0.25% in March 2003.
Let me now turn to some of the thinking that has already begun surrounding implementation of the New Accord. To ensure that our new rules have gotten it right, the Basel Committee has just completed collecting data for its third Quantitative Impact Study - or “QIS 3” - in conjunction with supervisors around the world. The industry demonstrated tremendous support for this survey, and 265 banks from nearly 50 countries performed concrete and comprehensive assessments of how the Committee’s proposals will affect them. At this early stage, the results suggest that the incentives built into the New Accord are functioning as we had hoped. We are completing a detailed study of the results and will ascertain the need for any adjustments prior to the release of an updated proposal for public comment during the spring. The Committee intends to finalize the New Capital Accord in the fourth quarter of 2003 such that it can be implemented in each member country at year-end 2006. During this three-year period, banks and supervisors are expected to adapt and develop the systems and processes necessary to conform to the standards of the New Accord. In that regard, the supervisory agencies represented on the Basel Committee are making good progress in their preparation for the new framework. To ensure that the New Accord is implemented in a consistent manner across various jurisdictions, such that market competition is driven by each bank’s strengths, rather than by differences in each country’s rules, the Basel Committee established the Accord Implementation Group.

Inflationary pressures were low during the last quarters. Reflecting also the Bank of Albania’s prudential monetary policy, inflation settled within its target in 2012. The increase in annual consumer prices was 2.4% at year-end, while the annual average inflation rate was 2%. The inflation rate increased progressively during the first three quarters and fell slightly during the fourth quarter. Inflation volatility was mainly driven by food prices, which were affected by the international market and domestic production. The effect of other basket goods’ prices on inflation was low and slightly volatile. Regulated or administered price inflation was insignificant, while higher prices for consumer goods, oil and primary commodities in the global market did not cause any higher inflation in the Albanian economy. From the macroeconomic viewpoint, all determinants of inflation contributed to keeping it at low levels. The incomplete utilization of productive capacity was associated with businesses’ low demand for labour, hence no pressures for increase in wages and labour costs. Also, the weak demand for goods and services reduced businesses’ ability to dictate final product prices and affected low levels of profit margins. On the other hand, low increase in the global market prices and the exchange rate stability helped in keeping import prices in check. Finally, expectations for a low inflation in the medium term were reflected in stable costs, prices and interest rate in medium-term and long-term contracts concluded in the labour market, in consumer goods and financial instruments.
It is this cost-benefit calculus that both motivates a role for macro-prudential policy, and helps us define precisely what we mean by it. In short, macro-prudential policy aims to improve the trade-off between the financial system’s contribution to the rewards expected in a growing economy and the degree of risk that we will face in the bad times. To return to my analogy, we might liken it to the NHS and to health insurance where we pay a bit in the good times to protect ourselves should our health take a turn for the worse. Principles of good policy making Macro-prudential authorities, like the UK’s FPC, work to ensure that financial systems are resilient to, and prepared for, the wide range of possible shocks they could face. Their aim is to ensure that when shocks occur, the financial system is able to absorb those shocks, rather than to amplify their impact on the economy. We ground what we do in two elements of good macro-prudential policymaking:  Macro-prudential policy should be targeted to provide a net benefit to the overall 3/7  BIS central bankers' speeches  economy. Where interventions incur costs, these should only be imposed when they are outweighed by the benefits over the full cycle. This is perhaps equivalent to starting a course of new medication, where a good doctor must be aware of potential side effects as well as intended benefits.

The role of macro-prudential policy Historically, there was a view among policymakers that as long as monetary policy guaranteed low and stable inflation, and micro-prudential regulation was successful in ensuring the balance sheets of individual institutions were robust to shocks, the financial system could take care of itself, and financial stability would follow. However, the global financial crisis revealed the flaws in this view: while monetary policy sets the benchmark interest rate for financial transactions and “gets into all the cracks” in the financial system, it isn’t sufficient to ensure that those transactions are undertaken efficiently and effectively. Similarly, micro-prudential policy ensures the safety and soundness of individual institutions, but does not take a sufficiently bird’s eye view to identify possible risks affecting the financial system as a whole. The financial crisis highlighted quite how much the whole is greater than the sum of its parts. And that ensuring the parts are healthy does not guarantee that the whole is. Macro-prudential interventions typically fill two gaps: 1. Individual agents don’t necessarily take into account the bigger picture. Individual financial institutions and borrowers face private incentives which do not take into account the wider social impact of their actions. In such cases, macro-prudential policymakers can seek to better align private costs and benefits with social costs and benefits. One example is the Financial Policy Committee’s (FPC) mortgage tools, which seek to limit the number of mortgages banks can extend for loans that are high relative to income.
18 Ghosh, AR, Ostry, JD, and Qureshi, M (2016), ‘When do capital inflows surges end in tears?’, American Economic Review. Surges are defined as a net capital flow observation that lie in the top thirtieth percentile of both the country-specific and the full sample’s distribution of net capital flows, expressed in percent of GDP. 12  7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  percentage points faster, all else equal, the typical EME with higher capital flow volatility will grow 0.7 percentage points slower.19 Following their experience of successive crises, EMEs have responded to these pressures by following the conventional wisdom to “keep their houses in order.” Over the past two decades, inflation targeting has been widely adopted, fiscal policy is generally improved, and macroprudential policy is increasingly active. Bank analysis finds that, for EMEs as a whole, reforms to these domestic institutional “pull” factors have substantially increased the sustainability of capital flows, all else equal (Chart 5).20 But unfortunately for EMEs, all else is not equal. Their efforts have not been sufficient because of the consequences of the growing asymmetry between the importance of the US dollar in the global financial system and the increasingly multi-polar nature of global economic activity. Monetary policy and financial stability shocks in advanced economies have become more prevalent and more potent, increasing the importance of “push” factors in driving capital flows.

Lars E O Svensson: Why a low repo rate for an extended period? Speech by Mr Lars E O Svensson, Deputy Governor of Sveriges Riksbank, at Handelsbanken, Stockholm, 4 May 2010. *  *  *  The opinions expressed here are my own and are not necessarily shared by other members of the Riksbank’s Executive Board or staff. I would like to thank Claes Berg, Per Jansson, Stefan Laséen, Christina Nyman, David Vestin and Staffan Viotti for discussions and comments. Björn Andersson, Joanna Gerwin, Tora Hammar, Lina Majtorp and Magnus Åhl have contributed to this speech. In this speech I would like to present my view of how monetary policy can best focus on stabilising both inflation and resource utilisation. I advocate an “extended” repo-rate path where “extended” refers to the period with a low repo rate of 0.25 per cent being extended until the end of the fourth quarter 2010. Here I will explain why. As I am sure many of you know, over the past year I have advocated a more expansionary monetary policy than that chosen by the majority of the members of the Executive Board. I entered reservations and advocated a lower repo rate and repo-rate path at all of the monetary policy meetings from and including the meeting in April 2009 to and including the meeting held in February 2010. Such a repo-rate leads to a better utilisation of resources and a better attainment of the inflation target without threatening financial stability.
Bond market liquidity has also improved after the swap operation conducted in November 2017, which contributed to the normalisation of the Greek government bond yield curve and also supported increased foreign participation in the bond market. Over the past few months, however, Greek bond yields have remained elevated and volatile, reacting to international and European stress, even after the approval of debt measures by the Eurogroup in June and the upgrade of Greece’s credit rating by the rating agencies. So we should be patient and prudent when assessing market access. Crucially, investor confidence will rely on the continued implementation of reforms and on avoiding backtracking on past improvements. Are you concerned that a crisis, for example in Italy, could jeopardise Greece’s market access? Wouldn’t a precautionary credit line, as Mr Stournaras had suggested, have been useful in this respect? Indeed, a precautionary credit line would have helped to cushion negative spillover effects from 3/4  BIS central bankers' speeches  the international markets and to reinforce the credibility of the Greek sovereign as an issuer. It was therefore a less risky path from a purely financial standpoint. That being said, it would have entailed continued policy conditionality. I respect the government’s judgement that, after eight years under various programmes, it was time for Greece to regain ownership of its policies. Is the ECB concerned about a hostile spirit often expressed by the government toward the Governor of the Bank of Greece, Mr Stournaras, and recently even indirectly towards the former Vice-President of the ECB, Mr Papademos?

What do you see as the main priorities for the post-programme period? What are the areas that Greece should focus on in the years ahead so as to achieve sustainable growth? And what are the main risks? In line with what I have just said, allow me to focus on the financial sector. Reducing NPLs is certainly top of the list from our point of view. On the one hand, only stronger and healthier banks can provide the necessary basis for an increase in the supply of credit that can support economic growth. On the other hand, the restructuring of private and tax debt that could 1/4  BIS central bankers' speeches  accompany the reduction of NPLs is also expected to help healthy companies restart their activities and thus reinforce the demand for credit. A lot has been achieved under the programme. The legislative framework is in place, but continued implementation will be key. Improving the effectiveness of the judicial system is also essential to guarantee a well-functioning financial sector. We also still envisage improvements in banks’ governance frameworks, which will be essential to establish the conditions necessary to attract both domestic and foreign investors and allow the divestment of Hellenic Financial Stability Fund (HFSF) holdings over time. In any case, it will be very important that the authorities refrain from trying to influence banks’ credit decisions and focus instead on improving the framework within which they operate. Are Greek banks now safe in terms of their capital position?
17  The UK is, in many respects, a prime example of that secular struggle in practice. The forces of secular innovation and secular stagnation are both operating powerfully, with the two productivity poles acting like magnets pulling in opposite directions. This is widening the distribution of productivity across firms and, as a by-product, contributing to a widening of the distribution of pay across workers. The tail of two companies has, as its mirror-image, a tail of two workers. Another perspective on these productivity dynamics is provided by viewing them through the lens of technological diffusion. In the fullness of time, innovation should be expected to diffuse through the economy, lifting all boats. That has been the lesson of every industrial revolution. Yet in the UK, this technological trickle-down, from frontier to tail, appears to have dried up. A lengthening flotilla of boats has remained in dry dock. The diffusion engine appears, for them, to have seized up. 18  15  Defined as the share of firms with annualised productivity growth of less than ½% between 2004 and 2014. Schneider (2018). For example, Gordon (2012) and Brynjolfsson and McAfee (2014). 18 To a lesser extent, there is some evidence of the same being true internationally (Berlingieri et al (2017)). 16 17  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Empirical evidence, using international innovation indices, supports this diagnosis. Despite ranking th  19  consistently in the top-5 for innovation, the UK ranks only 38 globally for knowledge diffusion.

7 The gap in manufacturing is around 50%. 8 UK estimates of firm-level productivity dispersion are based on Bank of England analysis of ONS data, whereas non-UK estimates of productivity dispersion are provided by the OECD. Differences in underlying data used may therefore play a role in Charts 5 and 6. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  low road. Capitalism always of course throws up winners and losers, hares and tortoises, gazelles and snails, upper and lower tails. In the UK, however, these differences are far-larger, and have increased by more, than elsewhere. And therein, I would argue, lie the roots of the UK’s productivity gaps. Let me start with the good news, focussing on companies on the high road. The first and most important point to make is that the UK does not lack for innovative, high-productivity companies. If you tour the UK, as I do, you find these “frontier” companies in every region and every sector. Their productivity is world-leading, their technology world-beating, their managers and workers world-renowned. They are inspirational. Micro-analysis of UK companies confirms this anecdotal impression. Chart 7 plots the distribution of UK 9  relative to French and German companies. There are more UK companies in the upper tail than in Germany, with its much-vaunted industrial reputation, and France. The top 10% of UK companies have levels of productivity at least 100% above the median.
These imbalances stand out as one of the most serious vulnerabilities faced by the domestic economy, as they are the main channels whereby the potential halt in external financing feeds through into exchange rate depreciation. Chart 6  Deposits and loans in foreign currency  non-financial corporations lei billion  households  2008  2007  2006  2005  2004  deposits in foreign currency loans in foreign currency net position 2008  2007  2006  2005  deposits in foreign currency loans in foreign currency net position 2004  40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70  lei billion  Source: National Bank of Romania  BIS Review 5/2010  9  These developments reinforced each other, so that during 2005–2007 there were periods when inflation expectations coexisted with a markedly stronger domestic currency. Under the circumstances, the central bank was faced with a serious dilemma in terms of the newlyadopted monetary policy regime. Policy rate hikes, required for bringing expectations in line with the inflation target, attracted further foreign capital, which entailed the appreciation of the leu. Along with policy rate changes given the coexistence of upward pressures on the domestic currency and inflationary pressures, the central bank also increased required reserves in order to dampen capital inflows. Required reserves for foreign currency-denominated liabilities were gradually raised from 20 percent at the onset of 2002 to 40 percent in early 2006 (Chart 7).

Another important aspect is the identification and division of the population according to their demographic, geographic and cultural characteristics. For us, financial education is a public  BIS central bankers’ speeches  3  good intended for all. In compliance with the best international experiences, we identified financial education for young people as highly important, targeting not only students but also their educators. Its practical realisation has been a complex process requiring adequate human and financial resources. For that purpose, the slogan adopted by us is very meaningful: “Education may be costly, but it is priceless”. The implementation methodology is widely known: meeting face-to-face, interactive games that intrigue children’s imagination, a series of publication with a flexible level of difficulties, training of teachers of economy, and a tour in various schools of the country. In this regard, I would like to point out to the recent contribution of the Bank of Albania to high-school students for the book on: “Personal finance in your hands”, which is conceptualised as an elective subject for high schools. Honourable participants, Education is a never-ending process. Learning is lifelong. It is deep, immense, and comprehensive. Therefore, I have to say that in spite of what we have done so far, we still have a long way to go. The Bank of Albania deems as imperative the drafting and implementation of a national strategy on contemporary financial education. The Bank of Albania stands ready to join any initiative at national level, which aims at promoting literacy across the country. Thank you!