samchain/econo-pairs-v1 huggingface dataset:
So, as long as monetary policy behaves about as it has in recent years, then there is no reason to expect supply shocks to have lasting effects. So is Fed policy behaving as it has since the mid 1980s? Interestingly, although Fed policy is perceived as exceptionally accommodative, because of hitting the zero lower bound the federal funds rate is actually higher – has come down less – than would be expected if the Fed behaved as it has over the last 25 years. The current level of the funds rate suggest that  4  BIS central bankers’ speeches  we have been less accommodative in recent years given that interest-rate reductions (policy easing) ran into at the zero lower bound.4 Why the different reaction to supply shocks over time? But how confident should we be that the relationship we have experienced over the past 25 years – little response in medium term inflation rates to supply shocks – will continue? The answer is rooted in why we are seeing different reactions to supply shocks – in other words a different interplay of total and core inflation – now versus in the past. There are a variety of reasons why medium-term inflation has not been significantly influenced by short-run supply shocks in recent years.

Returning to the U.S. and inflation concerns, Figure 14 shows that the growth rate of employee compensation has generally been declining over the past two decades. With compensation slowing and productivity increasing, many firms have been profitable and able to withstand increases in commodity prices without passing such costs on to final prices. This fits with the observation that higher food and energy prices have not tended to have much of an impact on prices in situations where food and energy are not direct costs of doing business. 4  The Fed’s Large-Scale Asset Purchases have partly, but not completely, substituted for the constraint imposed by the zero lower bound on policy easing. With all the excess capacity – a reflection of our inability to be as accommodative as we might have liked, given the zero bound – it seems unlikely that supply shocks will turn into increased inflation expectations that will affect wages and non-oil, non-food prices. 5  Vice Chair Yellen notes that “a key lesson from the experience of the late 1960s and 1970s is that the stability of longer-run inflation expectations cannot be taken for granted. At that time, the Federal Reserve’s monetary policy framework was opaque, its measures of resource utilization were flawed, and its policy actions generally followed a stop-start pattern that undermined public confidence in the Federal Reserve’s commitment to keep inflation under control.
Lars Heikensten: Monetary policy in Sweden  Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riksbank, at the Autumn Conference of the Centre for Business and Policy Studies, held in Stockholm on 17 November 2000. *  *  *  Thank you for the invitation to talk about monetary policy. If my memory serves me right, this is the fifth autumn conference I have addressed as deputy central bank governor. For me, the annual opportunity of discussing monetary policy with some of our country’s leading economists and economic observers has become a very enjoyable tradition. I shall begin, as usual, with a brief account of the past year, taking 1999’s October assessment as my starting point. Even though our appraisal of inflation at that time was relatively optimistic, the outcome has been better than we foresaw. Developments in the past year raise questions about the economy’s inflation propensity. That topic was already up for discussion at last year’s conference, though the reason then was that several leading observers considered the risks of inflation were being underestimated by the Riksbank. A third matter I shall be talking about is our monetary policy guidelines. In the past year we have been criticised for basing repo rate decisions on appraisals that are too narrow. Finally, I shall be looking ahead and commenting on our view of inflation in the coming years.

Last but not least, there is a need to build a healthy rental market. Policymakers need to be clear that the drive for affordable housing is not necessarily equivalent to the drive for “home ownership” alone. Adequate housing is about access, which can be achieved not only through outright ownership, but also through the ability to rent a decent home at affordable prices. The overriding policy priority should not be ownership at all costs. We need to learn from the Global Financial Crisis on the importance of a sustainable housing market. 2/3  BIS central bankers' speeches  Policymakers need to protect the interests of the public and the stability of the economic and financial system. It is also in the interest of the public that they do not buy homes that they cannot afford and fall into financial hardship, which will have detrimental consequences to socioeconomic stability. More broadly, we need to remember that one of the best ways to achieve the affordable homes objective is to promote employment opportunities and income growth for the people. This will strengthen their economic capability and financial position for home ownership. To some extent, we have observed some encouraging trends, including the fact that house prices are now growing more in line with income growth. Another important avenue for policymakers is the exchange of information and ideas. Through the sharing of experiences, especially with policymakers from other countries, we are able to learn and explore new frontiers.
As past experience shows, it is difficult to push inflation back up to the central bank’s objective if inflation expectations fall meaningfully below that objective. Japan’s experience is cautionary in this regard. Recent evidence on inflation expectations suggests some firming, but there is still cause for concern. Although both measures of longer-term inflation compensation based on nominal and inflation-indexed Treasury securities as well as some survey measures of inflation expectations have risen modestly since mid-February, the levels of many of these measures remain quite low. 2  BIS central bankers’ speeches  Now, as I have noted, the low level of market-based inflation compensation probably reflects factors besides inflation expectations, in particular lower term premiums. Still, it would be prudent to consider the possibility that longer-term inflation expectations of market participants may have declined somewhat. Even after a rise in its most recent reading, the median of the three-year inflation expectations from the New York Fed’s Survey of Consumer Expectations remains near its lowest reading over its short history. Renewed declines in survey measures would be worrisome. However, at this point, my conclusion is that inflation expectations have not become unanchored. In sum, I anticipate that the combination of decreasing resource slack and anchored longerterm inflation expectations will help push inflation up to our 2 percent objective over the medium term.

Emphasis on communication has also been boosted by central bankers becoming increasingly aware that effective communication facilitates the transmission of monetary policy decisions to the economy, thereby making their jobs easier. Nonetheless, the Eurosystem’s strategy has some differences when compared with the inflation targeting strategies. Let me focus my comments in this respect on two particular issues: the relevant horizon for policy and the role of macroeconomic forecasts in policymaking and in communication. The relevant horizon for policy Inflation targeting is often described as a framework where monetary policy responds to deviations between a conditional inflation forecast at a specific time horizon, typically of around two years, and the inflation objective. From a welfare perspective, however, focus on an ex-ante fixed horizon is problematic for a number of reasons. In particular, economic theory suggests that the relevant horizon for monetary policy depends in a significant way on the size and nature of shocks affecting the economy, as well as on the prevailing circumstances (i.e. the initial state of the economy). Moreover, taken at face value, this approach neglects the implications of policy for price stability at longer horizons. BIS Review 132/2007  3  In connection with this last point, a number of researchers (and notably research at the BIS 5 ) have been arguing quite convincingly that that short-term inflation control is not enough to prevent the emergence of imbalances, which may lead later on to costly episodes of macroeconomic instability.
The benefits of price stability, which are also important factors to the attainment of MDGs are: effective planning; lower investment costs; increased public and foreign investor confidence in the economy; improved external sector competitiveness; and accelerated economic growth needed to reduce poverty levels. (a)  Effective planning  When prices are stable, corporate institutions, governments, civil society and individuals are able to draw up their expenditure plans well into the future. In particular, companies will be  BIS Review 123/2007  1  able to reliably plan with some degree of certainty for their operations and long-term investment in fixed assets that will expand their production capacity and output and lead to increased employment as well as enhancement of incomes. Similarly, a government is able to make more accurate projections of revenues expected to be collected in future and thus more effectively plan its current and capital expenditures that are likely to benefit the poor. (b)  Lower cost of investment  Interest rates being the cost of funds will inhibit borrowing for investment if they are too high. Interest rates, therefore, are an important factor in attaining price stability. Low and stable interest rates, which are possible with the achievement of low inflation, create conducive credit conditions that improve accessibility and availability of credit to the productive sectors. Improved access to credit by the private sector will result in increased investment and production which ultimately leads to higher economic growth and improvement in standard of living.

This leads in turn to a rise in redundancies, something we have unfortunately seen in these last few weeks. Banks then become uncertain as to whether companies can pay back their loans. When uncertainty arises about the financial strength of companies, interest rates go up and it becomes more difficult for the financial system to mediate credit from lender to borrower. Investors, those who normally want to invest money to increase their returns, back away. When they do so, the functioning of other markets increasingly deteriorates. The Riksbank acts as a safeguard so that the system does not run out of money It is now a question of trying to shorten the period of risk aversion and credit shortage as it can exacerbate and prolong the downturn in the economy. As the Riksbank functions as the banks’ bank and supplies them with money which they then pass on to others in society, the Riksbank’s task is to supply money to the financial system. This reduces the risk of money shortages and sharply rising interest rates exacerbating the situation. By guaranteeing ample access to Swedish kronor that keeps down interest rates, the Riksbank helps to ensure that consumption and investment do not fall as much as they otherwise would have done. In this perspective, the Riksbank’s task is key in order to mitigate the effects on jobs and companies. And we take this task extremely seriously because “it is no game”, as one business leader put it in our survey.
Therefore, I think that we now need to implement a compatibility triangle to boost Europe’s growth and revive the European project. 1. The European monetary union has been a successful answer to the “impossible trinity” challenge The first triangle I’d like to dwell on is the famous incompatibility triangle derived from the MundellFleming model of the 1960’s, also known as the “impossible trinity” or the “trilemma”. This triangle has been used to argue that it is impossible to reconcile fixed exchange rates, full capital mobility and national autonomy of monetary policy. early as 1982, Tommaso Padoa-Schioppa coined the term “ inconsistent quartet”4 (quartetto inconciliabile), thereby enlarging the impossible trinity to a fourth goal, free trade – a pillar of the Treaty of Rome. Let me quote here an analysis by Banca d’Italia 5: “At first sight this may appear to be a puzzling choice, since from the strictly analytical standpoint the inconsistency between the other three elements holds regardless of the presence or absence of free trade. But in a deeper economic sense, taking trade into consideration was essential, since the costs and benefits of different positions along that three-way trade-off depend crucially on the degree of trade integration.” And as Tommaso Padoa-Schioppa wrote in 1988: “ In the long term, the only solution to the inconsistency is to complement the internal market with a monetary union.

The real effective exchange rate has also oscillated substantially, reacting to shifts in fundamentals such as the terms of trade, risk aversion and underlying capital flows. Compared with a long-term average of 100, the real effective exchange rate (measured in terms of BRL) has moved within 58, on October 2002, when the BRL was particularly weak, to 125 in August 2008, when it was stronger than the mediumterm norm. Regarding the balance of payments, the current account balance has averaged -1.0% of GDP, compared with a long-term average (since 1970) of -2.1%. Net FDI inflows have also performed relatively well, with an average of 3.0% of GDP, compared with 1.5% since 1970. Thanks to the improvement in the balance of payments the Central Bank has been able to accumulate sizeable foreign exchange reserves, which stand at about $ billion currently. The process of reserve accumulation did not impinge on the functioning of the floating exchange rate regime, as the Central Bank strove to buy foreign currency always through publicly announced auctions at the going market price. At inception of the floating exchange rate regime, the foreign sovereign credit rating was B+ (according to S&P) and Brazil had an active stand-by program with the IMF. Brazil is now investment grade, the sovereign credit rating stands at BBB- and the Central Bank has a currency swap agreement, as yet not drawn, with the US Federal Reserve. Of course, a floating exchange rate regime is a pre-condition for inflation targeting.
Shares of individual regions in global trade % Total  1990  1995  2002  Developed countries  72  67  63  US  12  12  11  UE15  44  39  38  Developing countries  28  33  37  Asia  13  19  20  Source: IMF Direction of Trade Statistics  6  BIS 75 Annual Report, 2005. 7  th  Ciccarelli, Mojon “Global Inflation”, Central Bank of Chile Working Papers No 357, December 2005. BIS Review 32/2006  3  Global capital flows keep growing even more dynamically, whereby the share of the global FDI in the global GDP increased from 8% in 1989 to 22.1% in 2003, and foreign assets expressed as percentage of the GDP increased from 62.6% of the GDP to 186.1% of the GDP, respectively. As evidenced, the role of trade and financial links between enterprises in various countries has become more important over recent years. Previously, in response to growing fuel prices or costs of living, trade unions demanded wage increases, which triggered the so-called second-round effects and central banks had to increase interest rates to mitigate inflation. Nowadays, trade unions must take into account the fact that in the case of wage increases, production and services may be transferred to countries with lower manufacturing costs.

In tribute to the Governor, as I know that Fernando Pessoa is one of his favourite poets, I'd like to quote his “Odes by Ricardo Reis”, in which he reminds us of the importance of being truly committed to our work. “To be great, be whole: don’t exaggerate Or leave out any part of you. Be complete in each thing. Put all you are Into the least of your acts." Thank you all for being here. 5/5
To meet its stability objectives in periods of financial instability, the monetary policymaker must probably put more emphasis on high-frequency financial markets information than he would otherwise do, because in normal times regular flows of macroeconomic statistics more or less suffice to form a correct assessment of the outlook. Special communication efforts are also required. One big challenge for communication in times of stress is to make the public understand that short-term liquidity management can be completely separate from the definition of the monetary policy stance with a medium-term perspective. As I have already pointed out 1 , a standard result in economic theory (William Poole’s paper from 1970) states that, when demand for central bank money is uncertain, then it is optimal to stabilise the short-term interest rate, letting money supply adjust endogenously. That is precisely what has happened in the euro area over the last half year. Indeed, the bulk of liquidity injections since last August was merely an attempt to align the  1  Cf. C. Noyer, “No moral hazard: the banks are doing their job”, Financial Times, 18 September 2007. BIS Review 15/2008  3  timing and maturity of the liquidity supply with a changing demand within the reserve maintenance periods, in order to stabilize the very short-term interest rate on the interbank market.

May I take this opportunity to thank our fellow regulators for their support in the setting up of the Academy and in providing guidance on its future work through the Board of Directors, which includes representatives from the Insurance Authority, the Securities and Futures Commission, the Mandatory Provident Fund Schemes Authority alongside the Hong Kong Monetary Authority. 6. Ladies and gentlemen, today the AoF will also confer Fellowship upon 10 distinguished leaders in recognition of their outstanding achievements and contributions to Hong Kong in the field of finance. May I take this opportunity to congratulate the Fellows and to express our deep appreciation of their remarkable achievements and contributions to Hong Kong over the years. 7. Before I conclude, let me express our sincere gratitude to the members of the Experts Group, Preparatory Committee, Exchange Fund Advisory Committee and the Financial Secretary, who is also the Honorary President of the Academy, for their support and 1/2  BIS central bankers' speeches  contributions that have made it possible for us to launch the AoF within a very short period of time. Lastly, the Managing Director of the International Monetary Fund, Ms Christine Lagarde, has asked me to convey her apologies for not being able to officiate at today’s ceremony as planned. Although not being able to join the occasion in person, she will deliver a video message to us later on. Once again, I thank all of you for joining this ceremony today. Thank you for your kind attention. 2/2  BIS central bankers' speeches
To answer correctly the question on compound interest rates, the interviewee must understand that the changes in an amount saved in an account depends not only on the annual interest rate applied to the amount saved the first year, but also on the interest accumulated thereafter. 54% of interviewees do not manage to correctly answer this question. The question on risk diversification measures whether the interviewee understands that the risk associated with investing in variable income diminishes if a broad range of shares is purchased instead of a single type of share. In this case, 51% of interviewees are unable to answer this question correctly. Even if analysis is confined solely to the one-third of the population that holds some type of financial asset (which, in Spain’s case, usually involves investment funds, pension schemes, shares and bonds), the percentage of incorrect replies to this question is still 40%. This result would be indicative of the fact that a high number of financial market participants appear not to be aware of the advantages of a fundamental aspect for reducing risk in financial decision-making, namely diversified investment.

Caleb M Fundanga: The role and operations of the Bank of Zambia Closing remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the end of the Bank of Zambia lecture series to members of the University of Zambia Business and Economics Association (UNZABECA), Lusaka, 24 November 2004. *  *  *  Chairperson Bank of Zambia Directors Members of UNZABECA Distinguished Ladies and Gentlemen As we come to the end of the series of lectures presented by the Bank of Zambia, it is my sincere hope that UNZABECA members have now gained a better understanding and appreciation of central banking, in general, and the role and operations of the Bank of Zambia, in particular. Ladies and Gentlemen, as it has been amply explained during the course of the Lecture Series, I would also like to reiterate that a central bank plays a critical role in the monetary and financial operations of any country. Through these Lectures, you have learned that the primary responsibility of a central bank includes, among others: •  issuance of currency;  •  acts as banker to the Government;  •  banker to commercial banks;  •  management of a country’s foreign exchange reserves;  •  lender of last resort;  •  management of public debt. Although some central banks do not carry such responsibilities;  •  collection and interpretation of statistics, in particular, financial and monetary statistics; and  •  implementation of monetary and financial systems policies.