samchain/econo-pairs-v1 huggingface dataset:
04.11.2020  Testimony before the Parliamentary Budget Committee in relation to the Draft State Budget for 2021* Pablo Hernández de Cos Governor  *Traducción al inglés del discurso original en español  Ladies and gentlemen, I appear before this Committee as part of the process to discuss and approve the State and Social Security Budget for 2021. The main aim of this Budget should, in my view, be to provide for the recovery of the Spanish economy in the coming quarters and to mitigate the considerable adverse impact caused by the COVID-19 pandemic to our economic growth and welfare. I shall begin by first describing the recent behaviour of the Spanish economy and, against a background marked by exceptional uncertainty, its possible course in the coming quarters, in light of the Banco de España’s projections. This description will allow me to assess the Government’s macroeconomic forecast which, as is habitually the case, frames the Draft Budget. Secondly, I shall offer my view of the main aspects of the Draft Budget for 2021, including the fiscal policy stance, its composition and the risks to the budget deficit target being met. Lastly, I shall set out what I consider to be the most significant challenges for Spanish fiscal policy in the medium term.

31.082017  Welcome address First Annual Research Conference of the Banco de España Luis M. Linde Governor  Buenos días, good morning to everybody. Let me welcome you all to the first Annual Research Conference of the Banco de España. We plan to make this conference our main research event each year. So, we hope that today’s edition is the first of many to come. Our aim is to bring together scholars and policymakers to express views and discuss on the key policy questions for central banking, both from an academic and a practical perspective. The conference reaffirms the Banco de España’s commitment to research as an indispensable tool for economic policy-making. Good research strengthens the foundation of our policy framework and lays the groundwork for the models we use in our economic and monetary policy analysis. The Banco de España commits significant resources to research. Let me give you some figures. Currently, according to the IDEAS database, our Bank ranks third in research among national central banks in the Euro zone. In 2016, researchers at the Bank published more than 30 working papers. Indeed, research is not a matter of quantity, but of quality; in the last few years our researchers have published in top journals such as Econometrica, the American Economic Review, the Journal of Political Economy, the various American Economic Journals and the Journal of Monetary Economics, just to mention a few examples. Over the last three years, fifteen young economists holding PhDs from renowned international universities have joined the Bank’s staff.
In any event, the FOMC’s latest policy statement in March recognizes this possibility of lower real rates, as the Committee stated it currently anticipates that “even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target fed funds rate below levels the Committee views as normal in the longer run.” 12  9  Taylor (1993), p. 197. 10  Taylor (1979). 11  See Summers (2013) and Krugman (2013). 12  Federal Open Market Committee (2014a). 8  BIS central bankers’ speeches  Conclusion During Ben Bernanke’s eight years as Fed Chair, the FOMC worked hard to make the Fed’s policy intentions clear; and I am confident that the FOMC under Chair Yellen will continue along this same path. When the federal funds rate got stuck at zero and goal-oriented monetary policy said to do more, we did more! We implemented the following: the first quantitative easing program, or QE1, in March 2009; 13 QE2 in fall 2010; the initial forward guidance on the federal funds rate in August 2011; Operation Twist in fall 2011; the openended QE3 in fall 2012; and the enhanced threshold forward guidance in December 2012. All of these were ways to go beyond the policy inaction that was the prescription of simple constrained policy rules, and do something to meet our policy mandates. In conclusion, let me ask again, what is the accountability test?

After all, notice that the red and green regions of the bull’seye chart show modest inflation above 2 percent is much more acceptable than even 6 percent unemployment. The FOMC should be anxious to get to that bull’s-eye region as quickly as feasible given the long slow path to date. The Fed’s reaction function I’ve spoken so far about how we are missing on our policy objectives. Obviously, the aim of policy is to eliminate those misses. How do we hit the bull’s-eye? What do we do 6  BIS central bankers’ speeches  operationally in terms of policy tools? In normal times, the FOMC moves it’s traditional policy tool, the federal funds rate, in order to influence aggregate demand and with it economic growth and inflation and disinflationary pressures. Many economists have studied the relationship between actual Fed actions and sensible, explicit policy rules that might capture the Fed’s policy reaction function (chart 4). Historically, Fed policy moves have been reasonably well described by simple policy rules, particularly the 1999 version of the so-called Taylor rule, 7 that relate the federal funds rate to the differences of output (a proxy for employment) and inflation from their target levels and a constant term that is meant to capture the equilibrium real interest rate and the Fed’s inflation target. However, this rule does not always describe policy well. For example, given judgmental, but reasonable, choices for the Fed’s inflation objective before it adopted a 2 percent objective, the Taylor rule misses during the 1990s are big.
The views expressed here are not necessarily those of the Financial Policy Committee. 1. My focus today is on risks from Private Non-financial Corporations (PNFCs), but risks from the corporate sector can,  Page 12 and historically have, also arisen through Commercial Real Estate (CRE) exposures. We stress test UK banks to ensure they are well capitalised to declines in CRE prices and to continue lending in a severe downturn. 2. Micro companies are to companies with less than £ in total assets. 3. There is some evidence that pension funds behaved counter-cyclically during the GFC for example. 4. The annual remit letter from the Chancellor sets this out in detail. 5. The survey will be run by a polling company on behalf of the Bank of England. We hope to launch it in the next few months. Sarah Breeden Executive Director, Financial Stability Strategy and Risk  ©2023 Bank of England

Connectivity to the Internet can serve to bring information from all over the world to the local education system. Iterative programmes can be useful to encourage participation. Web based programmes while requiring computer literacy, has a wider outreach and allows for flexibility of time that is of particular importance to women. A further means by which financial advise is provided is through financial advisors. Financial advisors are able to address the issues for the more sophisticated investors. Similarly, infrastructure for advisory services for small businesses is key. This can in particular be provided by financial institutions. Systems need to be in place where consumers and businesses are explained their rights and responsibilities. Micro credit institutions have also been highly successful in many countries in providing access to financial services to microenterprises. This will contribute towards greater reliance on the formal financial infrastructure and less on the informal structures. Higher level of consumer education and financial literacy must be complemented with effective disclosure regime, fair and transparent market practices, simplification of financial products and enhanced communications in the marketplace to minimise information asymmetry. While efforts may be taken to enhance transparency and disclosure by service providers, and while programmes for enhanced literacy can produce positive results, consumer protection is still needed. Given the asymmetry of information, consumers often do not have enough information to be completely protected. Building the confidence of consumers also requires that there be adequate avenues for consumers to seek redress to enable consumers to resolve conflicts through an equitable process.
8  For example, in the minutes of its policy meetings since mid-2014, the FOMC has repeatedly stated that “a gradual approach to raising the target range for the federal funds rate” was judged to be appropriate, while the minutes of the ECB’s policy meetings have noted that “prudence, patience and persistence with regard to monetary policy remained warranted”. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  b) Median household Bank Rate expectations Per cent 2014 Q1  6  2015 Q1  Pre-crisis average level of Bank Rate (5.2%)  2016 Q1  5  2017 Q1  4  2018 Q1  3 2 1 0  0  1  2  3 Years ahead  4  5  6  Notes: Household expectations are from the Bank/TNS Inflation Attitudes survey and show how Bank Rate is expected to increase relative to the rate prevailing at the time. Pre-crisis average Bank Rate is calculated from 1997 to 2007 inclusive. c) Proportion of households and companies expecting an increase in Bank Rate within the next year Per cent 100  EU referendum  90 80 70 60 50 Households  40 30 20  Companies  10 0  Jan. 2016  July  Jan. 2017  July  Jan. 2018  Sources: Deloitte CFO survey and IHS Markit Household Finance Index (HFI).

Crucially, the Committee has also initiated an annual stock take of the supply side of the economy. It now publishes its best collective judgments on the natural rate of unemployment, the output gap, as well as the expected growth in productivity, labour supply and potential output. To draw out these points consider three examples of forward guidance by the MPC. The first occurred five years ago when the economy began to recover from the worst downturn since the Great Depression. During previous periods of accelerating growth and firming business confidence, the MPC had always tightened policy significantly (as evidenced in the correlation between survey indicators and MPC votes seen in Chart 1). On the basis of this past behaviour, the MPC would have raised interest rates by 2 to 3 percentage points between August 2013 and the end of 2014. For anyone who might suggest the MPC should have followed that reaction function, note that, even on unchanged policy, CPI inflation in the summer of 2016 was running at only about ½% and core CPI inflation around 1¼%. 3  In other words, the amount of volatility in interest rates should match the amount of uncertainty surrounding the economy. There should ideally be no additional volatility, or risk premium, due to uncertainty about how policy would respond.
Economic importance of the EU, the euro and the ECB Ladies and gentlemen, as you all know, the EU is Switzerland’s most important foreign trade partner. And within the EU, the euro area countries play a particularly important role for us. In 2015, exports to the euro area accounted for around 44% of total exports; the share of imports from the euro area was larger still. Although the share of exports to the euro area has fallen by around 10 percentage points since 2000 – we are increasingly diversifying our foreign trade towards the emerging markets in particular – overall, the euro area countries remain by far the biggest consumers of Swiss products (cf. chart 2). The particular significance of the euro area for Swiss foreign trade means that the exchange rate to the euro is an important variable, both for our economy and for the SNB’s monetary policy. The exchange rate influences the price of foreign goods in Switzerland – and thus also inflation, as measured by the national consumer price index; but it also impacts the price of Swiss goods in the euro area, which in turn impacts domestic inflation via production and employment effects. Consequently, the monetary policy of the European Central Bank (ECB) is particularly relevant for Switzerland. This has become clear again in recent years. On the one hand, the ECB’s expansionary monetary policy has encouraged the economic recovery and helped to promote cohesion in the euro area – which in turn has bolstered demand for Swiss products.

This situation was compounded by weak economic data in the first half of 2011, which pointed to the risk of another global recession. Swiss franc appreciation accelerated in response to these developments, with the currency reaching historic highs against the euro and the US dollar and threatening to plunge Switzerland into a deep recession (cf. chart 3). The discontinuation of the minimum exchange rate in January 2015 The minimum exchange rate – which was to remain in place for almost three and a half years – halted the appreciation of the Swiss franc and helped to ease tensions. When we discontinued the measure in January 2015, the decision was criticised in some quarters. This is understandable, as the scale of the minimum exchange rate’s negative side effects was not yet fully apparent. However, the discontinuation of the minimum exchange rate was  BIS central bankers’ speeches  3  unavoidable; conditions had changed and an analysis of the risks clearly favoured the decision to remove the floor. The overall situation had improved significantly since the introduction of the minimum exchange rate. The economy had regained momentum, confidence in the US dollar had been restored and uncertainty had decreased considerably. Then there was the issue of divergence: the monetary policies of the US Federal Reserve and the ECB were moving in opposite directions. As the markets were expecting the Americans to tighten and the Europeans to substantially loosen monetary policy, the euro had been weakening against the US dollar since mid-2014.
It was only by acquiring these skills that workers could transition to where new jobs were being created. By keeping one step ahead of the machine, technological unemployment could be avoided. A shorter, more seamless skills transition reduced the hit to workers’ incomes and lowered the risk of skills atrophy, which might otherwise cause lasting damage to employment. This social infrastructure might be called “enabling” institutions. Another set of institutions provided workers with support to cushion the hit to their finances and well-being during the painful and lengthy period of job transition. This might be financial support, in income or loans. It might be housing or shelter. Or it might be social or emotional support. This social insurance ensured that lives were underpinned, inequalities held in check and the social fabric held together. It reduced recession risk, for individuals and for societies. These might be called “insuring” institutions. 32  29  Allen (2005) documents the stagnation of real wages in Britain from 1800 to 1840. IMF (2017). 31 Allen (2009) discusses Engels’ pause in the context of the British economy from 1760 to 1913. 32 Of course, many other institutions played a role in the labour market beyond the “enabling” and “insuring” ones mentioned here. For example, the ‘Poor Laws’ in the 1800s meant that the poor had to enter workhouses with terrible conditions to receive help in the form of clothes and food.

15  I will return to the Fourth Industrial Revolution when discussing future growth. A Different Growth Story  As appetising as this growth story sounds, a reading of the history books make it difficult to swallow whole. It is certainly plausible to think that a divine coincidence of Hargreaves, Watts and Arkwrights, in roughly the same place at roughly the same time, resulted in a white-hot crucible of creativity. Indeed, we might be seeing that self-same crucible of creativity in Silicon Valley today. But the Industrial Revolution was hardly the first firing of that crucible. We have, through history, seen many episodes of furnace-hot crucibles of innovation, spanning most continents and most centuries. 16  Successful  cities, regions, countries, continents and empires of the recent and distant past were often built and sustained on ideas and innovation and accompanying investment in machines and people. The Roman Empire is a case in point. Some of you will remember the sequence from Monty Python’s The Life of Brian which begins with the rhetorical question: “What did the Romans ever do for us?” The sketch concludes: “But apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order...what have the Romans done for us?”  You do not need to go that far back for examples of big ideas which had a transformative impact on industry and society.
All of these factors reflect the design and intent of the new framework as well as the process that we followed to develop it. The third and final topic that I would like to address this morning concerns what supervisors are doing right now to prepare for Basel II’s implementation - and what banks can do as well. 4. What are we doing to prepare for Basel II’s implementation? Now that the framework has been published, the Basel II project has entered a new phase focusing on implementation. Over the coming months and years, reality checks will continue to play a role for both bankers and supervisors in ensuring Basel II’s validity and feasibility as we implement the new framework. For our part, I believe that we can divide supervisors’ preparations into three main areas of  BIS Review 66/2004  3  focus. These include reviewing the calibration of the new framework; adjustments to the framework to reflect advances in risk management practices; and fostering a more consistent application of Basel II across jurisdictions. I’ll take a few moments to outline our work in each area. a)  Evaluate calibration of Basel II  First, the Committee has long expressed its commitment to ensuring that the framework performs as intended before it is implemented. This includes reviewing whether the framework delivers the amount of capital that we believe is necessary to protect the safety and soundness of individual banks on the one hand, and the broader banking system on the other.

This massive and rapid action was welcomed but raised questions, particularly in Germany: is the ECB not going beyond its mandate, endangering price stability? And even more "fundamentally ", where do these thousands of billions created all of a sudden come from? I will start with the second question: the specific feature of a central bank is its ability to create money virtually and without limits. However, it must be borne in mind that the money created by central banks is never simply “given away” permanently: it is loaned for a limited period; and it is channelled into the economy and eventually comes back to the central bank. The central bank can buy time through its monetary creation, and this is important. But it cannot sustainably increase wealth; only our work and economic growth can. I will now return to the first question, on whether or not we are fulfilling our mandate. In its founding Treaties, and under the legitimacy afforded to it by economic actors and public opinion, the ECB’s measures are bound by two interlinked anchors: its price stability mandate and its independence. They are inherited from the Bundesbank and in my view vital. Independence : the ECB is subject to neither national governments, nor to the pressures of the financial markets nor of passing trends. The ECB’s monetary policy must continue to support economic activity, for the sake of its own mandate of price stability.
And these narratives may be more prone to destabilisation than in the past. If so, too little may have been invested historically, by both the public and policymakers, in informing these narratives and hence stabilising the economy. Public understanding of the economy and finance starts from a low base. You do not have to take my word for it. That is the strongly-held view of the public themselves. In surveys, almost half of the public say they believe they lack an adequate understanding of economic and financial issues when making crucial everyday decisions. 17  This is a weak endowment. We now know quite a bit about the costs to individuals of this weak endowment, which appear to be large and long-lasting. For example, poor levels of financial education have been shown to have large and lasting effects on individuals’ health – financial, physical and mental. 18  Financial illiteracy is a recipe for debt, default  and depression, whose effects appear to feedback on each another in a vicious spiral. 17 18  FCA (2017). Richardson et al (2017), Earwicker (2016). 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  These individual costs are amplified when they are aggregated up to the macro level. How people’s expectations evolve – their degree of optimism or pessimism, exuberance or depression – is crucial for determining their individual decisions. It has long been recognised that these expectations can be shaped importantly by others’ expectations.

For this reason, we believe that it will be necessary to maintain the monetary stimulus for a prolonged period of time, in order to ensure that inflation approaches its 3% target and prevent it from stabilizing undesirably below that target. The latest decision of the Central Bank Board and its recent effects are proof that the monetary policy has effective instruments to continue applying the monetary stimulus even with the MPR at its minimum. Again, I am grateful to the Finance Commission of the Honorable Chamber of Representatives and its President, Representative Mr. Julio Dittborn, for letting me share with you our visions. The transparency with which we conduct our monetary policy is crucial in the uncertain global environment we are still enduring. Thank you very much. BIS Review 105/2009  3  Figure 1 Expectations for the MPR (1) (percent) 9  9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  Jul. 09  Jul. 10  Jul. MPR  Sep.' 08 Report  EES July' 09  Current forward (2)  11  Jul. EES Sep.' 08 Report  (1) Weekly averages used for the forward curve. (2) Forward curve at 21 July 2009. Source: Central Bank of Chile.