samchain/econo-pairs-v1 huggingface dataset:
This has widened output gaps and depressed inflation. In response, policymakers have provided unprecedented degrees of policy support – in a number of advanced economies, double-digit percentages of GDP in both Quantitative Easing (QE) and fiscal stimulus. These actions should stimulate activity, shrink output gaps and boost inflation. Chart 1: CPI inflation projection  Source: Bank of England. Notes: Projection from February 2021 Monetary Policy Report, based on market interest rate expectations, other policies as announced. 1  For example, Batini and Haldane (1999). 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  It is these heavy weights on either end of the inflationary see-saw which give rise to unusually large uncertainties around future inflation. If the hit to activity were to prove larger or longer, even this degree of policy stimulus may prove insufficient to return inflation to target. But if economies bounce-back as the vaccination programme is rolled-out, policy stimulus could over-stimulate the economy and, with it, inflation. There are few, if any, historical precedents to help judge the response of the economy to this scale of shock and degree of policy stimulus. And the costs of getting these judgements wrong could be significant. Costs for the economy, if policy is set either too tight (resulting in lost jobs and income) or too loose (resulting in policy needing to be tightened more than expected, causing future losses of jobs and incomes). And costs for central banks in damaged credibility, if inflation targets were to be missed persistently.

5  53% of the stock of bank loans to non-financial businesses pay a floating interest rate, and for an additional one third the interest rate is fixed for one year or less. BIS central bankers’ speeches  5  As a result of the Bank of England’s actions, we can relax other requirements to help with the flow of credit. Balance sheet repair will give confidence to depositors and investors who provide funding to banks. With that market funding assured, banks can safely hold fewer liquid assets, such as government bonds, that act as a cushion to be sold in the event that investors withdraw their funding. Accordingly, I can confirm today that, for major banks and building societies meeting the minimum 7% capital threshold, the Bank of England will reduce the level of required liquid asset holdings. The effect will be to lower total required holdings by £ billion, once all eight major banks and building societies meet the capital threshold.6 That will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy. Taken together, our actions create not just a more resilient system, but also one more able to support and sustain a recovery by serving the real economy. Crossing the threshold of balance sheet repair is not the end-point. The 7% capital threshold, like the 7% unemployment threshold, is only a staging post at which we assess our next steps.
Financial cooperation Financial cooperation is a critical component of this effort. Financial services is a significant part of our (6-7%) regional economy, and is a growing sector. But it is not just the size of the market that makes financial services important. The Asian Crisis has demonstrated that with globalisation and greater ease in transferring funds around the world, it is more critical than ever that our financial sectors be sound, and our economies not be weakened by excesses. In recognition of the importance of the financial sector, the ASEAN Finance Ministers started to meet in February 1997. We have introduced important co-operation initiatives, such as the ASEAN Surveillance Process to keep track of economic and financial trends and to provide early warning of economic vulnerabilities, and the ASEAN Finance Work Program to improve financial procedures, standards and corporate governance within member countries. These are important mechanisms to guard against a repeat of the Asian Crisis. To further liberalise and integrate our markets, the Finance Ministers last year endorsed a roadmap for regional financial integration. This will guide us towards greater liberalisation and integration of our markets. To keep ASEAN on the radar screens of international investors, Finance Ministers are planning to organise joint road-shows to Europe and the US to promote the investment opportunities in ASEAN. One possible area for collaboration is in the capital markets.

Exports are growing, and stock markets are up. As a regional grouping, we have continued to integrate our economies while individually pursuing restructuring. ASEAN is now back on its feet, up and running again. The necessity of deeper integration The need to broaden and deepen economic co-operation is a necessity recognised by ASEAN more than ten years ago. In 1992, ASEAN started the ASEAN Free Trade Area (AFTA) to boost intra-ASEAN trade and establish the region as a common area for manufacturing operations. At that time, the catalyst for greater integration was globalisation. Competition was getting tougher. Europe was consolidating and integrating itself to form the Single European Market. In North America, the US, Canada and Mexico were preparing to form the North America Free Trade Area (NAFTA). NAFTA provided US manufacturers an attractive, low cost manufacturing base in Mexico. Mexico too expected to benefit from new investments from the US, which would create jobs and bring growth and prosperity to the country. Both the Single European Market and NAFTA strengthened the competitiveness of the continents, and threatened to divert investments away from Asia. Determined not to lose out, ASEAN responded with AFTA. In retrospect, AFTA is perhaps the most important decision on economic cooperation that ASEAN members have taken together. Today, the world is even more globalised than compared to 1992. Competition is once again at our door step. This time however, the competition comes not from Europe or Mexico, but from much closer to home. China and India are growing very rapidly.
We are also acutely aware that the credibility of our exchange rate policy is quite crucially dependent upon our ability to pursue sound economic policies. This we do with vigour and determination, to the satisfaction of many with a keen interest in our affairs, including the IMF who year after year gives us a clean bill of health in its annual Article IV Consultations on Hong Kong. They were in Hong Kong for the 1997 Consultation towards the end of October 1997 and witnessed the after effects of the currency attack. And the report was full of praise on how we handled the situation, which is to me quite comforting, in contrast to the criticisms then from all sides which had been heaved at the HKMA for inflicting too much pain in our defence of the currency. Little do these critics know, as I explained to you earlier, that our system operates on auto-pilot without the need for the HKMA to exercise discretion in intervention in either the foreign exchange or the interbank markets. This the IMF concurred and in its report said specifically that “it is important to recognize that allowing interest rates to rise in response to exchange market pressures is an essential element of the currency board mechanism that lies at the heart of Hong Kong’s monetary arrangements. Recent events demonstrate that the system is working exactly as intended .........“21 Review of Currency Defence 34.

The economy has however managed to withstand these tests quite well, a testimony to the economy’s resilience to external shocks. Exchange rate flexibility, a lack of external imbalances, very low external debt, strong and flexible private sector all contributed to the success. As a backstop, the Bank of Thailand also has a comprehensive policy to deal with potentially disruptive capital flows, with sequencing that makes up multiple lines of defense. Having a credible policy response strategy confers an additional benefit of discouraging speculative flows in the first place. Equipped with a wide range of policy tools, including large foreign reserves, the current policy capability is adequate in meeting challenges of the day. Second pillar: fixing the shortfalls Ladies and gentlemen, At the same time, a number of pressure points in the Thai economy have started to emerge in the aftermath of the global financial crisis. The decline of economic growth in recent years relative to pre-crisis period hints at structural bottlenecks holding back the economy. Exports which were the leading driver of pre-crisis growth are expected to be flat this year, lagging those of our competitors. Anecdotal evidence suggests that some manufacturing sectors are struggling to be integrated into the global modern supply chain. Slow gain in labor productivity, and inadequate investment may be hindering the overall technological advances, a critical pre-requisite for sustaining long-term development. These problems are potentially our existing shortfalls that need to be overcome in the second pillar of development.
But we are very much aware that both policies may interact. As mentioned before, financial instability may undermine monetary policy’s ability to maintain price stability, both directly by its negative impact on credit provision, growth and inflation and indirectly by impairing the monetary transmission process. Conversely, a protracted low interest rate environment necessary to maintain overall price stability may create incentives to search for yield and lead to local bubbles in a heterogeneous monetary union. In both cases, macro-prudential policy can be used to address financial stability concerns and facilitate our monetary policy conduct. In the first case, where the financial stability concerns are of a systemic nature affecting the whole euro area, those policies will have to be coordinated. In the second case, national macro-prudential authorities may take actions to reduce the risk of local financial imbalances. In such a case, macro-prudential measures may exert cross-country spillovers that matter for monetary policy. For example, raising capital requirements in one jurisdiction may dampen lending in the whole euro area, while a tightening of loan-to-value ratios may simply shift lending between respective jurisdictions, leaving the euro area aggregate unchanged. A monetary authority may therefore have a legitimate interest in which macro-prudential measure is used. Many of these questions are yet to be fully explored and we have to acknowledge that the macro-prudential policy framework is still in its infancy. We are in a learning process.

What we are experiencing now is a prolonged period of low inflation, which will be followed by a gradual upward movement towards inflation rates below, but close to, 2% later on. Of course, inflation remaining low for a prolonged period of time is a risk in itself. It implies that there is only a small safety margin away from zero. And it makes structural adjustment efforts more difficult. Hence, it is important to carefully assess the causes of low inflation. In recent times, energy price developments in particular put downward pressure on headline inflation, a phenomenon that has contributed to weaker inflation at the global level. Moreover, low inflation partly reflects internal rebalancing efforts by way of which several countries, especially those in economic adjustment programmes, have aimed at improving their competitiveness. However, the low inflation outlook is also driven by continued weakness in demand. At this point in time, we do not have evidence of consumers postponing expenditure plans, which is  BIS central bankers’ speeches  3  something one would observe in a deflationary environment. But any setbacks in the absorption of economic slack may give rise to further negative developments. Against this background, we will remain alert as to whether any indications on further downside risks to price stability emerge and we stand ready to act. A second challenge we will be facing in the coming months is to make the Single Supervisory Mechanism really work.
Table 2  Domestic scenario 2022  GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Private consumption Goods and services exports Goods and services imports Current account (% of GDP) Gross national savings (% of GDP) Nominal GFCF (% of GDP)  2.4 2.3 3.0 2.8 3.1 2.9 1.4 0.9 -9.0 16.4 24.8  2023 (f) 2024 (f) 2025 (f) Mar.23 MP Dec.22 MP Mar.23 MP Dec.22 MP Mar.23 MP Report Report Report Report Report (annual change, percent) -1.75 / -0.75 -0.5/0.5 2.0-3.0 1.0-2.0 2.0-3.0 -5.3 -4.0 1.7 1.1 2.1 -4.6 -3.0 1.9 0.7 1.9 -5.0 -2.9 -0.2 -0.7 2.3 -4.5 -3.0 2.5 1.1 1.8 -5.9 -3.8 2.5 0.9 1.9 6.0 4.5 3.2 3.7 2.2 -5.4 -6.5 0.9 2.5 0.5 -4.9 -4.0 -4.1 -4.1 -4.0 20.2 18.7 19.8 18.9 19.2 24.3 23.3 23.8 23.2 23.2  (f) Forecast. Source: Central Bank of Chile. 19  Figure 13  Real consumer credit flows  (millions of UFs, moving quarterly average)  40  Rolling credit cards Credit card in installments Loans in installments Overdrafts  Households' financial burden (*)  (percent of monthly income, moving annual average)  20 19  30 18 20  17  10  16  0  15 14 15 16 17 18 19 20 21 22 23  19  20  21  22  (*) Median debtor's financial burden. Monthly income includes labor component (salaried formal) and pension fund withdrawals prorated over six months as from receipt of payment.

MONETARY POLICY REPORT PRESENTATION BEFORE THE FINANCE COMMISSION OF THE HONORABLE SENATE OF THE REPUBLIC∗  Rosanna Costa Governor Central Bank of Chile 5 April de 2023  The March 2023 Monetary Policy Report can be found on http://www.bcentral.cl. ∗  Introduction Mr. President of the Senate’s Finance Commission, senator Ricardo Lagos Weber, senators members of this Commission, ladies, gentlemen, On behalf of the Central Bank I thank this Commission for inviting us to present our views on recent macroeconomic developments, as well as their prospects and implications for monetary policy. This view is presented in detail in the March 2023 Monetary Policy Report, which we have published this morning. This background is also the rationale behind the decision adopted by the Board at yesterday's Monetary Policy Meeting. The presentation of this Report comes at a time when inflation is still very high. Although it has eased from the peaks of the third quarter of last year, it is still four times above the 3% target. Moreover, the core part of the CPI has been around 11% for some time now, accumulating a significant upward surprise in recent months. This is something that cannot be overlooked, as we are aware of the cost that this means for our country's families, especially the most vulnerable ones. There are several factors behind why inflation is taking so long to come down. Most important is that the economy has been unable to reverse the impacts of the overspending it accumulated between 2020 and 2021.
Enlargement is a political decision which concerns the Member States of the European Union. However, it seems natural that the Eurosystem will become more and more involved in this process in the near future, in particular given the implications of enlargement for our main tasks and objectives. Moreover, it is clear that the Eurosystem will play an important advisory role in areas related to its competencies. How should the Eurosystem address and view the enlargement process? Let me make a few general remarks. First, it is my view that the Eurosystem should adopt a constructive attitude towards the prospect of EU enlargement. This applies also to the participation of new EU Member States in ERM II and their eventual adoption of the euro. The Eurosystem should be prepared to advise the accession countries both in undertaking necessary structural reforms and in pursuing the stability-oriented policies which are required in order to fulfil the accession and convergence criteria. Moreover, the Eurosystem should also stand ready to cope with additional requests to provide technical assistance to these countries and, in particular, to their central banks. A second observation is that the Eurosystem should support equal treatment as a key feature of the accession process. This implies that objective and uniform criteria should apply, in turn, to accession, participation in ERM II and adoption of the euro.

Of course, times change, and with them the economic and monetary environment. This was certainly the case in the 1970s when, following the collapse of the Bretton Woods exchange rate system and the explosion of oil prices, monetary authorities around the world were faced with new and difficult challenges. In many countries, attempting to meet these challenges was accompanied by a move to flexible exchange rates. However, for the most part, we Europeans attempted and eventually succeeded in treading a different path. This was also the case here, when, in the latter years of Governor Zolotas’ time in charge at the Bank of Greece, exchange rate stability was sought by pegging the drachma to the US dollar. As we all know, at that time Greece was not yet a member of the European Community. But this was also soon to change. Indeed, assisting in the successful preparation for membership of the European Community is yet another notable contribution that Governor Zolotas made to Greece’s economic history. Since that time Greece has continued to face challenges as a member of the European Community, and now of course of the European Union (EU). Greece is one of the four EU Member States which have not yet adopted the euro. It has announced its willingness to do so in 2001. In order to join the euro area, the convergence criteria with respect to inflation, long-term interest rates, public finances and exchange rate stability have to be fulfilled. Sustainable convergence is a prerequisite for adopting the euro.
The US had a trusted process through the Federal Deposit Insurance Corporation, backed by a credit line from the US Treasury. By contrast, prior to the crisis many member states of the euro area did not even have a national resolution framework. Since 2008, the FDIC has resolved over 500, mostly smaller banks in the United States. While determining the exact definition is tricky in the euro area, the number appears less than a hundred.1 All this explains why the recovery of the banking sector took longer in the euro area, which our monetary policy had to work to mitigate. And what is more, when public authorities in the euro area did intervene to backstop their national banking sectors, the fiscal implications naturally differed: the onus fell entirely on national budgets. This in turn contributed to the second area where the euro area and the US diverged: the emergence of the so-called “vicious loop” between banks and sovereigns, which further delayed the financial repair process. Importantly, this vicious loop not only further impaired monetary transmission, but it also had implications for the stance of monetary policy. The need for accelerated fiscal consolidation to quell the sovereign debt crisis constrained the ability of fiscal to carry out macroeconomic stabilisation in the euro area and hence the overall policy-mix. Whereas the US could consolidate its budget against the backdrop of a firming recovery, some euro area governments were forced into a pro-cyclical fiscal stance. That in turn worsened the macroeconomic environment in which monetary policy had to operate.

Despite swift efforts to set up a European Banking Union there were in fact three major differences between the euro area and US in terms of the environment facing monetary policy: the sluggish recovery of the banking sector, the fragmented fiscal framework of the euro area and the structural rigidity present in many euro area economies. The necessary process of banking sector repair proceeded much more slowly in the euro area than in the US. Indeed, here in the US it was more or less completed by end-2011, but in some euro area countries it is still ongoing, even today. US authorities exerted pressure on banks (and non-financial corporations) to recapitalise with public money, via the Troubled Asset Relief Program. In the euro area, there was a preference for recapitalisation through organic growth. Recapitalisation in the United States was bolstered by the early and effective use of stress tests in the US to restore confidence in solvent banks, reinforced by a credible backstop. By contrast, early attempts at stress tests in the euro area were hampered by splits among national supervisors and, with only national backstops available, the tests proved unsuccessful at 2/7  BIS central bankers' speeches  restoring confidence in the banking system. US banks were also encouraged to recognise nonperforming loans (NPLs) more quickly, freeing up capital for new lending. The third difference was the ability to efficiently resolve insolvent banks and prevent the emergence of “zombie lenders”.
As history bears witness, such strategies are as good, but only as good, as the assumptions that are programmed in, be they about economic forecasts, covariances between various events, or whatever. But even if we felt that these particular strategies were foolproof, there are a myriad of other financial transactions which can only really be consummated by a conscious human decision. The home buyer faced with a choice between taking a mortgage from bank A or bank B is unlikely to have a sophisticated and reliable mathematical model with which to compare the offers and determine conclusively his choice. But the culture nowadays, bred at least in part by the technological feasibilities of the IT era, is one which is likely to place the home buyer under much greater pressure to reach a quick decision than his parents would have been a generation ago, or even his brother five years ago, for fear of losing the best offer - if only he could assess which was the best. There is less time to reflect; less time to seek out disinterested advice. There are of course some areas of finance which appear relatively untouched as yet by this revolution. In the realm of corporate finance, in every jurisdiction so far as I am aware, the documents seeking shareholder support for a merger, for example, are still required to be sent by post, and with a reasonable minimum notice period for response.

As a central banker I feel some empathy with those who find themselves sandwiched between pressure on one side from their masters to achieve ever lower funding costs or ever better returns from financial investments, and persistent enticements on the other side from bankers claiming that you could be freed of all that pressure if you simply subcontracted everything into their capable hands. Treasury has come to be regarded in many instances as a separate profit centre. The treasurers of some major corporates are nowadays acknowledged as being at least as significant players in the financial markets as are the banks themselves. There are some well-known examples where the profitability of an enterprise in the manufacturing or services sector has been sustained by deft treasury and financial management for considerable periods when the mainstream business has itself been floundering. And there are also examples, alas, where reputable companies have been brought to their knees by flawed financial management. You probably don’t have an easy life, but you won’t need me to tell you that. I find myself wondering whether or for how long the financial scene will continue to be one of such rapid change as we have been witnessing in recent years; and what the implications are, for any or all of us here, of recent and prospective developments in financial products and infrastructure.