samchain/econo-pairs-v1 huggingface dataset:
However, if interest rates were moved up gradually from current levels, in a well-communicated strategy that was understood by the public, the business community and financial markets, the cost of borrowing would still be low in real terms and I do not believe that the recovery would be seriously damaged. Indeed, for the many UK households which rely on the income from savings and investments, this could provide a powerful boost to confidence by signalling the beginning of a return to more normal economic conditions. The other very important way in which monetary policy can support recovery is by maintaining confidence in price stability over the medium term. The mandate for the Monetary Policy Committee makes clear that the best contribution that the MPC can make to sustained economic growth is by maintaining price stability – which is specified in terms of a 2% target for CPI inflation under our current remit. There are good reasons why low and stable inflation remains the focus of our monetary policy. The effects of high inflation are damaging in their own right – eroding the value of savings, hitting pensioners on fixed incomes and creating an uncertain and volatile business climate. After inflation got out of control in the UK in the mid-1970s, we experienced two decades of economic volatility and high unemployment, including three major recessions. Fortunately, there is little risk today of a return to that era of double digit inflation rates.

Indeed, the latest readings from the nonmanufacturing PMI last week showed a surprising pick-up in growth. The latest US data on retail sales and industrial production are also reasonably positive and help offset some of the more downbeat indicators from the housing market. In the US, just as in the UK, we have to recognise that the data may be somewhat variable at this stage of the cycle. We should therefore beware of interpreting this variability in the economic indicators as a sign that the recovery is seriously faltering in the United States, or anywhere else in the global economy. There is, however, a flip side to the strong rebound we have seen in the global economy since the middle of last year. While the growth of the global economy is helping to sustain the recovery in UK economic activity, it is also putting upward pressure on global energy and commodity prices, along with the impact of a number of weather-related events affecting the supply of commodities. And in a world affected by climate change, we may expect to experience these weather-driven upward price shocks more often. These upward shocks to UK inflation from import prices – amplified by the relative weakness of the pound – have contributed noticeably to the recent experience of above-target UK inflation.
Textbook flexible inflation targeting The textbook account of a flexible inflation targeting regime explains that when interest rates are set to bringing inflation back to the target, consideration is also given to the effects on the real economy; an appropriate balance between inflation and real variability is sought, which implies that an immediate reversal to the target is not an end in itself. Textbook accounts of flexible inflation targeting typically give the following answer to the question of how asset prices should be factored into the monetary policy decision: monetary policy should respond to changes in asset prices to the extent that they affect the inflation and growth forecasts. Thus, there is no independent role for e.g. rapidly rising house prices. Their effect on the monetary policy decision should come only through their effect on the inflation and growth forecasts. This recommendation, and the assumptions on which it is based, is something I will comment more on, below. Leaning against the wind Another view often put forward is that a central bank can bring about better outcomes for inflation and output by reacting to rapidly rising asset prices, over and above their implications for inflation and growth.

The constellation of a weaker growth dynamic and higher oil prices could, however, delay getting monetary policy back on track. Since central banks are committed to the goal of price stability, a lot will depend on the transmission of oil price increases to inflation expectations. In most industrialised countries, inflation expectations give no cause for concern for the time being. Low inflation expectations and flexible monetary policy concepts allow central bankers to carefully adjust their monetary policy for 2005, provided that it seems appropriate for business cycle reasons. 1/1
The unemployment rate is still near 6.5 percent, low from a historic perspective, but the creation of salaried jobs has remained slow and surveys reveal increased uncertainty about the future behavior of the labor market. For companies, the greater pessimism has coincided with low profitability levels and investment conditions they see less attractive. Along with this, inventories are still judged as excessive despite repeated reductions in the past few quarters. As mentioned earlier, domestic credit cost has become more favorable, in line with the substantial reduction of the monetary policy rate that took place in the past year (figure 6). Long-term interest rates also declined significantly during the last year and a half, mainly responding to monetary policy actions (figure 7). Still, real annual growth in consumer and commercial lending is low, in some cases in its minimums of several years. The exception is mortgage credit, which is still growing strongly. The September Bank Lending Survey reveals a tightening of supply, but more importantly a drop in demand. The baseline scenario sees output growing 1.7 percent this year, marginally below the range foreseen in September. This reflects the aforementioned weakness of economic activity in the third quarter and its extension into the last quarter of the year. It also reflects that, so far, consumer and entrepreneurial expectations have failed to post the improvement that was expected some months ago.

One consequence of structural change is that when old sectors or companies fail to survive, scope for new employment is created in sectors where the country enjoys a comparative advantage or in domestic services that are not exposed to competition to the same extent as the goods sector. For a long time, the growth of the public sector compensated for the drop in employment in manufacturing and created new jobs at an even faster rate than the old ones disappeared. If such a change process is to proceed quickly and smoothly, it requires a lot in terms of the ability to adjust and the flexibility of people and companies. It also requires that policy facilitates the ability to adapt through the design of regulatory systems. The labour market has to function in a satisfactory way and it must be feasible to make the time difference between closure and new establishment as short as possible. In other words, it is a question of reducing the frictional unemployment that arises when industries or companies are wound up and people need to move or retrain in order to find work in a new location or in a new company or industry. The fact that employment is so low in Sweden today, given the state of the economy, may be a sign that the labour market is not flexible enough to meet the demands imposed by tougher competition or that the economy is not sufficiently dynamic. 1  IMF’s definition.
Therefore, in the second part of my intervention, I would like to explore in more detail some of the most important recent trends and developments in risk management theory and practices, and also the impact that these developments can have both on individual firms and on the economy as a whole. I will cover three trends in particular: firm-wide assessment of risk, risk aggregation and risk transfer. This will lead me to the third part of my intervention: the challenge of devising a supervisory response which harnesses these developments for the benefit of financial stability. As I will argue, it is critical to ensure that our supervisory and regulatory structures are compatible with the best practices in risk management today. But I believe that our structures must go beyond that and actually encourage firms to continue to improve their measures of risk exposures and their approaches to mitigating them in the future. This forward-looking approach forms the basis of Basel II. In the final part of my intervention, I will explore some of the implications of Basel II that received some attention in recent times: namely, the potential impact of the new framework, both on capital flows and on global competition. My purpose today is not to describe Basel II in detail, but rather to highlight the dynamic processes that it stimulates.

It is my hope that in that book of the future, the Basel II framework would be portrayed as a revolution in our approach to financial regulation. It would represent the introduction of a new regulatory and  BIS Review 8/2005  1  supervisory paradigm, one premised on the need to begin to depart from blunt requirements and instead to develop rules that incorporate nuance, rules that align capital requirements more closely to the actual degree of economic risk a bank faces. Our author might write that Basel II represented an important step forward in continuing to replace static rules with rules that offer incentives for firms to improve constantly their internal governance and management of risk. And that it marked a milestone in the trend toward leveraging the power of the market place to exert discipline over firms’ decisions and strategies, such that other marketplace participants can better serve as effective allies of regulation and supervision to achieve financial stability. Yet I must confess that, with the evolution in practices and technology that can reasonably be expected by the year 2046, the Basel II capital framework released in June 2004 might well be judged to be excessively simple. Still, its greatest virtues might be considered its forward-looking nature and its flexibility, and its ability to adapt to new circumstances and to the emergence of better risk management practices.
While there is no doubt that unconventional monetary policies (UMPs) have helped stabilise the financial system and supported economic recovery after the Global Financial Crisis (GFC), many have argued that the economic or financial benefits created by UMPs have not been shared evenly. Some studies have highlighted that UMPs disproportionately enrich the “haves”, as they tend to hold more assets such as stocks and properties that benefited most from UMPs.3 Hong Kong has been experiencing this trend, especially in the housing market. With a prolonged period of close-to-zero nominal interest rates and negative real mortgage rates, Hong Kong’s housing prices have been rising for over 10 years. This has eroded housing affordability and widened significantly the wealth gap between home owners and those who have yet to buy a home. How should central bankers and policymakers think about this important issue and what can be done about it? We have lined up a couple of presentations focusing on housing today and tomorrow, which I hope will shed some light on 1/2  BIS central bankers' speeches  policymaking in this area. 6. Having looked at UMPs’ implications on asset prices, let’s now turn our attention for a moment to labour income. To the extent that UMPs have driven aggregate improvements in the labour market in terms of job creation, they have nonetheless failed to benefit some segments of the workforce that are the most in need. For example, many of the jobs created are low-paying and/or part-time in nature.

Norman T L Chan: Monetary policy’s effect on wealth distribution and a way forward for policymakers Welcoming remarks by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Monetary Authority and Federal Reserve Bank of New York Joint Conference, Hong Kong, 23 May 2019. * * * 1. Good morning, President Bullard, Director Hirtle, ladies and gentlemen. Welcome to this conference jointly organized by the Federal Reserve Bank of New York and the Hong Kong Monetary Authority. I would especially like to thank our overseas guests who have travelled a long way to be with us today. 2. Over the past 40 years, the global economy has undergone impressive growth and transformation. From 1980 to 2018, PPP-adjusted real per capita GDP in advanced economies and emerging market economies have increased by 94% and 205% respectively1, driven by globalisation, open markets, technological advancements, and the general trend of falling inflation. 3. But the news is not all good. While the world economy has done well on the whole, economic inequality has widened noticeably at the same time. Just take a look at the Gini coefficient, which is a commonly cited measure of income inequality.
In this situation, the Swedish authorities implemented a series of measures:   The Swedish National Debt Office issued extra treasury bills and, in practice, let the banks exchange their mortgage bonds for more liquid government securities.   The government and the Riksdag extended the deposit guarantee and quickly passed laws enabling support to the banking sector.   In addition to the repo rate cuts we implemented, the Riksbank provided liquidity in several ways. We lent money for longer periods, eased the policy for collateral and introduced more counterparties to supply more liquidity to the banking system. We created swap lines with the Federal Reserve and ECB to meet the banking system’s need for foreign currency. We also contributed to crisis management in neighbouring countries by creating swap lines with Iceland, Latvia and Estonia. Finally, we also extended emergency loans to Carnegie and Kaupthing Sverige. 4  BIS central bankers’ speeches  The Riksbank no doubt considers that Sweden’s crisis management was successful. And other analysts have also shared this assessment – including, for example, Goodhart and Rochet in their review of the Riksbank’s work carried out last year.2 Unlike other central banks, we have also been able to phase out our crisis measures. The crisis has cost enormous amounts The crisis entailed huge costs, both for society as a whole and for the tax-funded public sector. Andrew Haldane, Executive Director of Financial Stability at the Bank of England, has shown that the crisis cost UK taxpayers just over 1 per cent of GDP.

The advances made by the European Council in December 2018 are a step in the right direction but clearly need to be strengthened and built upon. The success of the Banking Union will depend on the establishment of a solid resolution mechanism, – probably even more than a full common deposit insurance scheme. Regarding the backstop of the Single Resolution Fund, in the interests of financial stability, we should consider extending the maturities on the credit lines. And we will not achieve an effective and 4/6  BIS central bankers' speeches  profitable Banking Union without cross-border consolidation in Europe: there are still too many roadblocks and not enough cross-border restructuring. Unfortunately, there was almost no progress at all on the Capital Markets Union in the December agreement. Let us finally move on from a rhetorical consensus in principle to concrete headway, notably on harmonising bankruptcy regimes and strengthening ESMA. Both the Banking Union and the Capital Markets Union are the key components for a genuine “Financing Union for Investment and Innovation”: I have put forward this idea as a way of better channelling our abundant resources – our EUR 340 billion private savings surplus – towards the concrete needs of European economy: the energy transition, SMEs’ equity or digital innovation. But the strengthening of the euro area should also include public mechanisms of solidarity. Regarding the ESM, it should not be just about managing crises ex post, but about preventing them ex-ante above all by reinforcing our precautionary tools.
I believe the Nordic countries could be a good testing ground for macro-prudential policies. Nordic owned banks cover most of the market in the Nordic area, including the Baltic states. One hurdle that one would have to overcome would be different cyclical developments across Nordic countries. Capital requirements would need to be linked to customer location. For example, credit to Norwegian firms would have to be subject to a higher capital requirement than credit to Finnish firms, if Norway were in a boom and Finland in a recession. I hope that this challenge can be solved and that the next recession will be met with a better macro-prudential framework in place. 2  BIS Review 69/2009  BIS Review 69/2009  3  4  BIS Review 69/2009

Tarisa Watanagase: Future regulatory challenges for emerging markets – a case for Thailand Speech by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Association of International Banks (AIB) Dinner Talk, Bangkok, 19 October 2009. *  *  *  Chairman, Board members and members of the Association of International Banks, Distinguished Guests, Ladies and Gentlemen First of all, I would like to thank you for inviting me to join you today. I welcome the honour and look forward to the opportunity of meeting you, especially at this important juncture in the history of global financial system development. In the past two years, we witnessed one of the most severe financial crises in modern time, and with it, a sharp impact on the global economy, especially after the demise of Lehman. Today, the global financial market has stabilized, albeit not having returned to normal, with many major parts still in retrenchment such as securtisation market. Today, an almost one year anniversary of the global fallout, the Dow Jones once again retraced its step, and touched 10,000 points. There are increasing positive signs of global economic recovery. Nevertheless, there are still significant uncertainty and downside risk, going forward. These include uncertainty on the exit policy of stabilization measures of various countries, the differential speed of adjustment of various regional economies, and not least, the impending challenge of regulatory reform demanded by the public at large. Throughout this turbulent period, Thailand’s financial system has remained resilient and stable.
Like our time-honed interest-rate policy, these balance-sheet policies were introduced with price-stability objectives in mind. But now that our extended toolkit has brought us new degrees of freedom, it is valuable to think of how this new flexibility could be used in the long-run to minimise financial stability risks without compromise to price stability. Let me illustrate it with the example of tiering. The tiering system we have decided upon will allow our interest rate policy to deliver price stability without trading it off against financial stability. Far from entering into conflict with price stability, tiering will actually also ensure that our policies have their intended  Page 8 sur 11 effect on price stability, by alleviating the risk of a reduced pass-through of our policies to the financing cost of the private sector. And it may enhance the monetary policy stance by mitigating the side effects of keeping rates lower for longer. There is no reason to commit one particular monetary instrument to the financial stability objective. Instead, a parallel with public finance can prove useful. It is customary in public finance to see the problem of choosing tax rates as one of minimising the distortions created by various tax instruments, in order to raise a given amount of revenues. Similarly, it is possible to approach our monetary policy decisions as one of choosing the combination of instruments that minimise risks to financial stability, in order to deliver the policy stance called for by our price-stability mandate.

Conference of the Chair BdF/PSE, Paris School of Economics Current Challenges of Monetary Policy September 24, 2019  Speech i by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 sur 11 Ladies and Gentlemen, It is a particular pleasure to welcome you on the occasion of the 10th anniversary of the Chair Banque de France/PSE. All anniversaries are worthy of celebration, but the continued partnership of Banque de France with the Paris School of Economics is a particular reason for cheer. Over the past ten years, it has been a testimony of how academic research and economic policy making can reinforce each other. In the past ten years, thanks to their interaction, much has been done to make our financial environment more capable of reining in financial excesses. Thanks to both, we have introduced many new unconventional tools to implement monetary policy. But these changes have also brought new questions and new uncertainties, on which more academic research is needed. Hence, I would like to elaborate on two present challenges: the conduct of monetary policy in our current economic environment, and the interaction between monetary policy and financial stability. ** 1. Monetary Policy in the Face of New Challenges 1.1. A New Environment Calling for New Responses  These new uncertainties arise at a time when the global economic environment has itself become increasingly uncertain.