samchain/econo-pairs-v1 huggingface dataset:
Subsequently, the SNB had to make very substantial interventions in the foreign exchange market to enforce the minimum exchange rate. In order to support the minimum exchange rate, we introduced negative interest on sight deposit account balances at the SNB. At first, the situation quietened down again. However, this proved to have been the calm before the storm. Due to growing expectations that there would be a further substantial  BIS central bankers’ speeches  1  relaxation of monetary policy in the euro area, the euro weakened again significantly in the first half of January 2015. In the wake of this downturn, pressure on the minimum exchange rate increased enormously. Unlike the situation in 2012, when the monetary policy stance in the US and the euro area remained unchanged, it became evident that this time the minimum exchange rate could only be enforced through permanent currency interventions of rapidly increasing magnitude. In other words, the minimum exchange rate of CHF 1.20 per euro was no longer sustainable. Adhering to the minimum exchange rate would have led to an uncontrollable expansion of our foreign currency holdings and, thus, of our balance sheet, potentially to a level several times Swiss GDP. The risks associated with a balance sheet expansion of this scale would have been out of all proportion to the benefits of the minimum exchange rate for the Swiss economy. In particular, an expansion of the balance sheet would have severely impaired the SNB’s ability to conduct monetary policy in future.

Such a long balance sheet would have made further monetary policy measures substantially harder. At the same time, we would have jeopardised the fulfilment of our mandate in the long term, since reabsorbing such a huge volume of liquidity once monetary policy began to normalise would have been very difficult. At its monetary policy assessments, the SNB had analysed the costs and benefits of adhering to the minimum exchange rate. On the basis of this kind of analysis, the Governing Board concluded, on 15 January, that a minimum exchange rate of CHF 1.20 per euro was no longer sustainable, and thus justified, from a monetary policy point of view. If it had ignored the changes in the international environment, the SNB would have jeopardised its credibility. It would have been irresponsible to maintain the minimum exchange rate even longer and thoughtlessly accept the high costs of this policy, without considering its sustainability. Once we had reached this conclusion, swift action was necessary. Holding off any longer would have increased pressure on the minimum exchange rate because of mounting speculation. Had we delayed the discontinuation, the turmoil on the financial markets would have been no less severe. However, the impact on the Swiss economy would have been stronger and the losses on the SNB’s balance sheet would have been greater. Ladies and gentlemen, the decision of 15 January has far-reaching consequences and was anything but easy for me and my colleagues on the Governing Board.
3/8  fact, Norway has scored particularly favourably in recent years by managing to sustain productivity8 growth at a strong level. We seem to have avoided this symptom of Dutch disease. Restructuring in the Norwegian economy in the 1990s, changes in the tax system, broader and deeper financial markets, deregulation in trade and service markets and the use of the market mechanism in the telecommunications, postal and transport sectors appear to have contributed to a more efficient use of resources. This is a fourth positive result. Another wealth effect could be lower labour force participation and higher welfare spending. In Norway, labour force participation is relatively high after lagging behind our neighbouring countries up to the 1990s. The labour force participation rate has declined somewhat in recent years, but is still at a high level. This is a fifth positive result. However, the average number of person-hours worked is lower than for the other Nordic countries, and this difference seems to have increased through the 1990s to date. The increase in the labour force participation rate during the period does not seem to be the explanation. Reducing working hours is one way of spending income and wealth gains. We could also spend wealth gains by reducing the retirement age. OECD figures show that the difference between the official and effective retirement age is wider in Norway than in other comparable countries. Developments in expected retirement age are a cause for some concern. A working 40-year-old can now expect to retire at around 63.

My congratulations go to the four winners, as well as to the other participants for some brilliant ideas in response to the four problem statements. I am truly impressed by all the solutions, and I hope to see our banking community benefit from similar solutions in the near future. Maybe the HKMA should also explore the use of some of those solutions as well. 15. Apart from the Global Regtech Challenge, the HKMA has launched multiple initiatives to grow Regtech in Hong Kong. Some of those include the Fintech Supervisory Sandbox, the Fintech Career Accelerator Scheme, and a Regtech skills framework that we will be releasing in the coming months. 16. Industry associations also play a key role in promoting Regtech adoption in Hong Kong, because they help foster greater industry collaboration and communication. It was good to hear in our ‘Path Forward’ panel that following the publication of our Regtech white paper in November last year, there has been a higher level of engagement with Regtech-related associations in Hong Kong. We will continue to maintain close dialogue with the industry associations. Working together to achieve our Regtech 2025 vision 17. Looking ahead, we expect the demand for Regtech solutions to continue to grow. The HKMA will provide more guidance to the industry by issuing the Regtech Adoption Practice Guides, developing a Regtech skills framework, and building a Regtech knowledge hub. 18. But we will only achieve our Regtech 2025 vision if the Regtech ecosystem works together towards the same goal.
At the moment, although the European and US government bond markets are of comparable size, the non-government bond market in Europe is ‘only’ a third to half the size of that in the US; and much of that is bank issued debt. I would expect the euro corporate bond market to develop significantly in the medium term. And with it, I would expect to see other product markets develop, as they have elsewhere (in the UK, but especially in the US) – for instance markets for asset backed securities and commercial paper. As part of this I think we will see a trend to greater issuance at the lower credit end of the market (or ‘high yield’, as it is politely named). In the euro area around 70% or corporate bond issuance is by issuers  3  BIS Review 43/1999  rated Aa2 and above. In the US, it is around 30%. I would expect that gap to close a bit, and I think there are already signs of life in the European high yield market. While I am on the subject of European bond markets, I would like to make just a few remarks about the proposed EU withholding tax. The stated objectives of the scheme – reducing tax evasion and reducing structural unemployment – are clearly desirable ones. But in thinking about any kind of withholding tax a judgement has to be made about the trade off between the efficiency of tax collection and the efficiency of capital markets.

In this particular case, I think the open nature of the EU economy sets very serious limits on the proposal’s potential impact on the collection of tax, since the same scope for avoiding tax would continue to exist outside the EU as it does at present; and it seems unlikely that countries outside the EU area would voluntarily follow the same policy. So I think there is a very real danger that legitimate business would relocate, not just outside London, but outside the EU, thus further undermining any economic rationale for the proposal. This does not mean that work should not continue to see whether there are amendments to the scheme that could satisfy the interests of all the parties involved. But the Bank continues to believe that it is important to avoid any scheme that would damage EU financial markets. Turning to equities, I expect to see growing emphasis on analysis and investment according to European sectors, not countries. Thus you would expect to see investment banks’ research departments focusing more on pan-European sectors, rather than dividing their teams on national lines. In many firms this is happening already. More generally, I think we can expect to see greater “equification” in continental Europe. In the UK, the equity market’s capitalisation is around 165% of GDP. Among the “ins” it is generally much lower: in Germany and Spain it is perhaps 35%, in France 40% and in Italy 25%. Only the Netherlands really stands out, at around 130%.
Gordon, Paul, Piotr Skolimowski and Craig Stirling (2019), “Lagarde’s ECB Toolkit Threatened as Subzero Skepticism Grows”, Bloomberg, 31 October. Jansson, Per (2016), “Time to scrap the inflation target?”, speech at Swedbank, Stockholm, 7 December. Jansson, Per (2017), “The ideological debate on monetary policy – lessons from developments in Sweden”, speech at Fores, Stockholm, 6 December. Jansson, Per (2018), “Monetary policy in less favourable times – what are the options?”, speech at Insurance Sweden, Stockholm, 4 December. Milne, Richard (2019), “Riksbank set to exit negative rates with December rise”, article in Financial Times, 24 October. 14 [17]  Orphanides, Athanasios and John C. Williams (2003), “Imperfect Knowledge, Inflation Expectations, and Monetary Policy”, NBER Working Paper No. w9884. Weiss, Ittay (2017), “Nothing matters: how the invention of zero helped create modern mathematics”, The Conversation, 20 September, https://theconversation.com/nothing-matters-how-the-invention-of-zero-helped-create-modernmathematics-84232  15 [17]  Figure 1. Inflation, 1350-2018 CPI, annual percentage change 300  300 CPI  200  200  100  100  0  0  -100 1350  1450  1550  1650  1750  1850  1950  -100  Source: The Riksbank  Figure 2. Share of employed persons in industry and mining and private service sector respectively Per cent  35  35 Private services Industry and mining  30  30  25  25  20  20  15  15  10  10  5  80  85  90  95  00  05  10  15  5  Note.

Even if inflation has been subdued in recent years, it is not likely that we have arrived at “the end of inflation” for all eternity. Inflation has always varied and never been constantly high or low for any particular length of time (see Figure 1). It is difficult to see how society could have changed so fundamentally that this historical regularity now no longer applies. Assume that inflation, for reasons we cannot currently identify, will be, say, 4 per cent a few years ahead. Even those who now consider the inflation target having become irrelevant would probably then see the benefits of a credible anchor at 2 per cent. A credible inflation target stabilises wage formation, both when inflation is unexpectedly high and when it is unexpectedly low. Second, it is very unclear what might replace the inflation target as the anchor for prices and wages in the economy. One possibility is of course for Sweden to revert to a fixed exchange rate. This is something I will return to shortly. My interpretation, however, is that those who think the inflation target has run its course for wage formation are not predominantly advocating a return to a fixed exchange rate. Instead, they seem to be relying on the wage formation reforms themselves being sufficient. According to these reforms, which are collectively known as the Industrial Agreement, industry has, for over twenty years, been setting the benchmark for wage negotiations and is thereby steering wage growth in the entire economy.
This indicates that the Thai economy is likely to be much more resilient to the possibility of a taper tantrum than other countries. The second factor that indicates our resiliency is our banking sector. Our banking sector remains sound. Capital ratios are high with the BIS ratio at 20 percent, overall liquidity remains high, and provisioning levels are also high relative to NPLs. Thus, the banking sector remains highly liquid and very strong by most measures. The banking sector has also continued to function throughout the crisis by extending credits and we have seen credit growth in most areas with one notable exception which I will discuss later. This indicates that the banking sector is acting as a shock absorber and not a shock amplifier. The third area of resiliency is on public finance. Our public finances remain sound even though the public debt to GDP ratio has increased in line with other countries during the crisis. However, for Thailand, the public debt to GDP ratio remains reasonable, standing in the high 50s percent as a share of GDP. This indicates that the government has room available to engage in additional fiscal stimulus if it deems necessary. Furthermore, the ability of the country and the government to engage in more fiscal firepower includes the fact that 10-year borrowing rate on government debt remains relatively low. The government is able to borrow at less than 1.7 percent, a much lower borrowing cost than other countries in the region.

Public finances are also perceived to be sound, where risks are relatively low and liquidity is high. Given that our external vulnerability remains low, although additional borrowing by the government will contribute to an increase in the current account deficit, risks on the external front and the implications of additional public sector borrowing will remain low and limited. Even though we have been hit hard and harder than other countries and that our recovery is likely to take longer and be more uneven, the resilient economy is there. The downside risks of seeing a sharp decline stemming from weaknesses on the balance of payment front, the banking front, or the public finance front thus remain quite limited. Page 3 of 9  Part 2: The Bank of Thailand’s Response to The Crisis Let me now turn to the second part of my remarks, which is what we, at the Bank of Thailand, have been doing. To summarize very briefly, the Bank of Thailand has taken a flexible and pragmatic approach to addressing the crisis. We are willing to do, have been willing to do, and remain willing to do what it takes to get us out of this crisis. The statement, which we have been using internally, is to say that all reasonable policy options are on the table to respond to this unmitigated crisis that we are facing now. First and foremost, we have tried to ensure that financial conditions remain accommodative to support and facilitate the recovery.
One possible explanation of this resilience in underlying costs and prices is that demand and supply have fallen largely in lockstep, leaving slack in the economy relatively little changed. The design of the furlough scheme, which has supported household incomes and aggregate demand at the same time as labour supply has fallen sharply, would support that interpretation. While output in the UK is likely to have fallen by around 8% during 2020, household incomes are likely to have been broadly flat. An alternative explanation lies in the heterogeneity of Covid’s impact on certain sectors, lowering demand sharply for some, raising it for others. If the price effects of the latter have dominated the former – for example, because of capacity constraints on expanding supply in some sectors – this might explain the relative robustness of aggregate cost and price measures.14 The sectoral pattern of demand and prices during the Covid crisis is consistent with this explanation (Chart 11). We have also seen these price dynamics at work in other markets as demand has recovered, notably in commodity markets. The price of oil has risen by around 65%, and of non-oil commodities by more than 20%, in the last four months. This reflation reflects rising (actual and expected) demand for these  commodities, alongside short-run constraints on supply. The MPC’s judgements on slack are shown in Chart 12, together with estimates of the output gap following the global financial crisis.

At its peak, the UK government was paying the wages of around a quarter of the workforce (9 million people) and is still doing so for around 4 million workers. Judging the true “employment status” of these furloughed workers, in particular whether they are actively seeking work, is difficult to judge. It is also difficult to gauge how many of these furloughed workers will return to their jobs once the furlough scheme ends. That leaves the current unemployment rate, the likely future unemployment rate and the equilibrium unemployment rate (taking into account the natural frictions associated with people moving job) all highly uncertain at present. This means measures of labour market slack in the economy are also highly uncertain. The same is true, for many of the same reasons, of measures of spare capacity within firms. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  With quantities uncertain, one indirect measure of slack comes from looking at the prices of labour, goods and services. These, too, have faced measurement problems and have been distorted by sharp shifts in the composition of employment and spending. 13 Nonetheless, most measures of underlying inflation and costs have been surprisingly resilient over the past year, given the scale of the contraction in activity. For  example, core CPI inflation rates have fallen by only 0.2 percentage points over the past year, while private sector average weekly earnings growth has been roughly unchanged.
Indeed, the question has been receiving increasing attention in the international financial community, and attempts are being made on both the academic front and among those with policy responsibility to model financial stability and integrate it with the more traditional macroeconomic analysis, in both the domestic and international dimensions. I await with keen interest the emergence of an authoritative analytical framework of general application. Meanwhile, I share the views of some that financial stability can be negatively defined as the lack of financial instability, given that it is easier to define what the latter is. In my opinion, when the financial system fails to function properly, in terms of mobilising savings to finance economic activities - the all-important process of financial intermediation that promotes economic growth and development - then there is financial instability. When, as a result of a shock to the financial system, money is suddenly not available even for the creditworthy fund raisers no matter how high a price they are prepared to pay, then financial stability is not achieved. Alternatively, when, because of a breakdown of confidence for one reason or another, those with surplus money are simply not willing to trust the financial system with it, by placing it with banks or investing in financial instruments, then financial stability is not achieved. 17.

Up to now, monetary policy has remained accommodative to foster the growth momentum but the Monetary Policy Committee will be monitoring inflation developments closely, especially the second round effect of energy prices feeding through to core inflation. The aim is to prevent higher inflation from dampening the anticipated recovery of consumption and derailing the pick-up in investment. Indeed, the MPC has been holding the policy rate, in light of the fact that the growth recovery has remained on track and supported by fiscal policy, while closely following inflation developments. As the MPC meets next Wednesday 21 May, we will assess the latest data available and indicators on both growth and stability to decide on the appropriate stance of forward-looking monetary policy. Ladies and Gentlemen, Undoubtedly, the risks to global growth and inflation will not make macroeconomic management an easy task in the immediate term. But, I can reassure you that Thailand’s economy will maintain its resilience against potentially adverse developments, judging from the following four dimensions. First, policymakers today have sufficient room for maneuvering a flexible policy mix as a result of continued adherence to policy discipline. Our fiscal policy is not constrained by concern on public debt sustainability while monetary and exchange rate policies have room to safeguard economic stability and smooth out short-term fluctuations. Indeed, under the new Bank of Thailand Act, the Monetary Policy Committee will be charged with legal responsibility in the realm of both monetary policy target and exchange rate policy and management.
In such cases, maintaining the medium-term orientation in the definition and attainment of the target would be all the more advisable. How is expected inflation over the medium term measured? First, it is important to clarify that predicting inflation over a two or three-year horizon is a very challenging task. Especially in a setting as uncertain as the current one. Therefore, like other central banks, we at the ECB use various indicators of future inflation, such as surveys of professional forecasters and financial market prices, which I will come back to later. Key data in this regard are the ECB staff projections, which in turn draw on a wealth of economic and monetary analysis. As I have said, the latest projections published in September put average inflation in 2024 (the end of our medium-term horizon) at 2.3%, clearly above our target. These projections were based, among other considerations, on a future path of euro area interest rates – implicit in the financial market data available when the projections were prepared (specifically, as at 22 August 2022) – that began with a hike of 50 bp at our September meeting, followed by subsequent further increases.8 Accepting that, in line with our mandate, interest rates will have to rise to a level that allows us to ensure a gradual convergence of inflation to our medium-term target, returning inflation  8  Specifically, the projections were based on short-term interest rates of 0.2% in 2022, 2.0% in 2023 and 2.1% in 2024.

Caleb M Fundanga: The MDG-consistent monetary policies Talking notes by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of the UNDP organised workshop on Macroeconomic Analysis and Modelling in Support of Millenium Development Goals-Based Planning, Lusaka, 29 October 2007. *  *  *  Introduction First and foremost, I would like to thank the UNDP through the Resident Representative, Mr Aeneas C. Chuma, for inviting me to say a few remarks at the opening of this important international workshop on “Macroeconomic Analysis and Modelling in support of Millennium Development Goal (MDG)-Based Planning”. Let me also welcome you all, especially those who have traveled from other countries to come and attend this workshop. I understand that the aim of this workshop is to strengthen the foundation laid for MDGBased planning processes in Africa on the issues of pro-poor polices and macroeconomic modelling and to explain what an MDG-Consistent Medium-Term Expenditure Framework (MTEF) is all about. The workshop is also intended to sensitise and enhance your knowledge of pro-poor policies in the context of MDG-Based planning and strengthen understanding and skills in MDG-Consistent Macroeconomic Modelling and MTEF.