samchain/econo-pairs-v1 huggingface dataset:
While the essentials of inflation-targeting are as strong as ever, the regime is being tested as never before. The Covid crisis has seen interest rates fall to their effective lower bound (ELB) and Quantitative Easing (QE) restarted on a scale that may yet match the decade-long period after the Global Financial Crisis. By the end of this year, the Bank will hold close to £ trillion of nominal Government assets, around half of their total and 40% of GDP. Other central banks find themselves in a similar spot. Truth be told, this is for me an uncomfortable spot. It is uncomfortable for two distinct but related reasons. The first, nearer-term, is discomfort at whether continuing monetary stimulus is consistent with central banks hitting their inflation targets on a sustainable basis. A second, more medium-term, discomfort is whether the monetary policy strategies being pursued by central banks are at risk of time-inconsistency, fiscal dominance and an erosion of central bank independence. The restrictions imposed as a result of the Covid crisis caused an extra-ordinarily large and sharp contraction in activity, almost without precedent. As these restrictions are lifted, we would expect an equally large and sharp recovery. That bounce-back is now well underway in the UK. Indeed, current data suggest it is occurring faster and sooner than expected, with the economy already within statistical spitting distance of its pre-Covid level. This rapid bounce-back has been quasi-automatic, as restrictions have eased, businesses have reopened and people have returned to working, shopping and socialising.

José De Gregorio: Exchange rate, macroeconomic policies, and the global scenario Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, before the Senate at a special session on the exchange rate, Valparaíso, 14 December 2010. * I. *  *  Introduction  I am grateful for the Senate’s invitation to analyze exchange rate issues, some of the most complex ones facing our country, as well as Latin American and most emerging market economies. We are thus obligated to carefully evaluate the current economic environment, its implications on the performance of our economy, and the measures that can be taken if deemed necessary. In addition, these instances for analysis are important opportunities to communicate in a very transparent fashion the vision of the Central Bank of Chile. Along the last few decades, Chile has benefited enormously from being open and globally integrated. This has been one of the cornerstones of our economic growth. However, the international economy is at the same time a source of volatility for our economy. The prices of our exports, the economic activity of our trading partners, foreign interest rates and international investors’ appetite for risk fluctuate substantially. These variables affect our national income, fiscal accounts, external demand for our products, and the availability and cost of external financing and, indirectly, expenditure, output, the interest rate and the exchange rate in Chile. It is impossible to eliminate this volatility without sacrificing the benefits of our international openness.
It has been decided to bring forward a number public sector construction projects and launch the expansion of the Nordurál aluminium smelter at Grundartangi. Furthermore, activity on the Kárahnjúkar hydropower project will be more intensive than was previously assumed. Combined with the cut in the Central Bank’s policy interest rate in February, these three factors will lead to more demand in 2003 and 2004 than was assumed in the national economic forecast, and all things being equal this will spur GDP growth. Central and local government authorities have decided to bring forward construction projects amounting to a total of 10 b.kr., of which roughly 5½ b.kr. will be made in 2003 and 4½ b.kr. in 2004. Plans have been made for expanding the Nordurál aluminium smelter in two phases. Production capacity will be stepped up by 90 thousand tonnes per year in 2005 and by a further 60 thousand tonnes in 2008 and 2009. In connection with the expansion, projects will be undertaken at Nordlingaalda, Nesjavellir and Reykjanes to supply power for the smelter. Investment on account of the Nordurál expansion will total 2½ b.kr. in 2003 and 14 b.kr. in 2004. According to the latest projections by Landsvirkjun [the National Power Company] for hydropower development at Kárahnjúkar its expenditure on the project will be 5 b.kr. higher in 2003 than previously estimated, and just over half a billion kr. greater in 2004. 4  BIS Review 18/2003  In all, this represents a total extra investment of 13 b.kr.

during the current year and 19 b.kr. next year, over and above the amounts assumed when the Central Bank’s latest macro economic forecast was published last month. On the basis of these new assumptions, preliminary studies suggest that economic growth could easily end up in the range 2-2½% this year and well over 3% next year. The annual growth rate is as much as 1% above what was previously forecast. The employment outlook has also improved considerably. Given that the negative output gap was never very wide, and that seasonally adjusted unemployment measured 3.2% in February and has changed little since September, it is clear that inflationary pressures are likely to develop much sooner than was previously thought. Inflation this year is likely to be close to the Central Bank’s 2½% target, but other things being equal it could rise next year. While it is foreseeable that these major construction projects could coincide to some extent in 2004 and 2005, most of the weight will be felt in 2005 and 2006. Thus economic policy implementation will face a greater challenge than was thought when only the Reydarfjördur aluminium smelter and related hydropower development were foreseen. The new outlook calls for economic policy responses on both the monetary and fiscal side. While the scale of the response will be determined by exchange rate developments, it is clear that preventing overheating and inflation will be a major challenge in the period ahead.
To cross-check the projections for potential output and thus the output gap, we also look at alternative indicators of pressures in the economy. The wage gap measures the difference between actual wage growth and the growth that over time is consistent with the inflation target, and is an indicator of labour market tightness. With an estimate of 2 per cent productivity growth, wage growth of 4.5 per cent over time will be consistent with an inflation target of 2.5 per cent. In the chart, the wage gap up to 2000, i.e. before the introduction of the inflation target, is defined as the difference between wage growth in Norway and in other countries. As we see from the chart, there appears to be a close relationship between this wage gap and the output gap as it is measured by Norges Bank. If we look at developments in employment in relation to trend growth (measured as a percent of the population in employable age groups), we get a similar path. 5  2  Norges Bank has chosen, in keeping with ordinary practice, to use a smoothing parameter, ? = 100 in the annual data. BIS Review 6/2004  We also consider credit growth to be an indicator of public demand. Growth in credit which over time deviates from growth in nominal GDP may indicate that the level of activity in the economy is higher or lower than normal.

The deviations enter the loss function quadratically. Large deviations from the targets are thereby deemed to be a considerably more serious disadvantage than small deviations. In the event of large deviations between inflation and the inflation target, or substantial imbalances in the real economy, the use of relatively strong measures may be appropriate. The trade-off between inflation stability around the inflation target and stable growth in output is expressed by parameter . The higher is, the greater the emphasis on real economic stability in relation to stability in inflation. With a is the definition strict inflation target, i.e. emphasis is only placed on inflation, is equal to zero. of flexible inflation targeting. Although the loss function has two add factors, both of which are given emphasis, a fundamental difference is that the monetary policy authorities can choose the inflation target but not the level of potential output. In practice, no central bank uses a loss function of this kind directly. What inflation-targeting central banks do in practice does, however, contain elements of the thinking behind this theory. 6  See the box “Flexible inflation targeting and indicators of pressure in the real economy” in Inflation Report 3/03, p. 46, for a more detailed description of the different indicators. 7  See for example Svensson, Lars E. O. (2002): “Monetary Policy and Real Stabilization”, in Rethinking Stabilization Policy, A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 29-31, 2002, pages 261-312.
The growing importance of Islamic finance Indeed, Islamic Finance has grown most significantly in the last decade, posting double- digit rates since 2007, at close to 20%, compared with growth of 4% in the “conventional” financial sector. It has now reached a volume of $ 2 trillion, which is a very significant figure that represents around 1% of total global bank assets. The surge of Islamic Finance is apparent both in Islamic countries and also, in European markets, with the establishment of Islamic banks and the development of the Sukuk market for private and official issuers under some European jurisdictions. The prospects for Islamic finance are also positive, given the extensive scope for the financial inclusion of a population in a number of countries, with very low rates of bank access and usage. The regulatory challenge of Islamic finance The further development of Islamic finance will nonetheless depend on implementing the necessary financial reforms to ensure its integration into the wider financial system. Here, I think that the challenges are twofold: FIRST, in Islamic jurisdictions the challenge is to continue developing the architecture of Islamic finance in areas such as payment systems and supervisory and resolution regimes. In particular, it would seem vital to advance towards the standardisation of Islamic finance regulation, breaking the existing jurisdictional heterogeneity, in order to take advantage of a wider international market. The SECOND challenge refers to the integration of Islamic finance into the wider financial system.

Luis M Linde: Islamic finance – growing importance and regulatory challenge Welcoming remarks by Mr Luis M Linde, Governor of the Bank of Spain, at the European Forum on Islamic Finance, organized by the Islamic Financial Services Board (Madrid), Madrid, 24 May 2016. *  *  *  Mr. Jaseem Ahmed, Secretary-General of the Islamic Financial Services Board (IFSB); Mr. Guillermo de la Dehesa, Chairman of the International Advisory Board of IE Business School; colleagues, ladies and gentlemen: It is a pleasure for me to welcome you all to the European Forum on Islamic Finance. This is the fifth European Forum since 2005, after the previous fora in Luxembourg, Germany, France and Italy. Following the tradition established by other European central banks, we are glad to support this event, organised by the IFSB. I would also like to thank the IE Business School for their hospitality in hosting the Forum in Madrid today. The purpose of this European Forum is to gain a better grasp of the specifics of Islamic Finance and its development, which has been particularly noticeable in the last decade. In this respect, I would like to stress two relevant aspects of Islamic Finance in my opening remarks: FIRST, its growing importance in international finance; and SECOND, the ongoing regulatory efforts to facilitate its insertion in international markets.
I am very sceptical about this strategy, as it could turn into an indirect yield curve control, which is not the intention.25 There is a considerable risk of misunderstanding between the central bank and market participants. I think that the experiences of the coronavirus crisis clearly indicate a middle way. During the initial phase of the crisis, economic uncertainty was monumental. We decided to go big and fast, as illustrated, for instance, by the fact that most of the measures were decided within a week of the WHO declaring a pandemic on 11 March 2020. The rest of the measures were adjustments or additions to an existing plan. As decision-makers, we did not have the luxury of awaiting detailed research results on what would be the best response, but acted to avoid the real economic crisis developing into a financial crisis. Both the Swedish Coronavirus Commission and the external assessment of monetary policy by Flug and Honohan concluded that such an approach was favourable to economic developments in Sweden.26 So much for big and fast. However, I am very doubtful about the rapid phasing out of assets on our balance sheet through active sales. One reason I have already mentioned is that the maturity of our assets is relatively short. But another reason is that the aggregate international experience with QT is very limited, and there are very few data points for estimating the effects. The precautionary principle 24 See Bailey (2020).

5 [19]  colleague, Governor Stefan Ingves, has observed.11 Further back in time, the Riksbank had a large portfolio of Swedish securities, which eventually was sold off around the turn of the millennium, since it was not considered necessary for conducting monetary policy.12 As shown in Figure 6, the Riksbank's assets currently represent a large proportion of GDP in an historical perspective. However, as a percentage of the total financial assets in the Swedish economy, the proportion is barely visible. Kristin Forbes is professor at MIT and was a member of the Bank of England Monetary Policy Committee 2014-2017. In her speech at Jackson Hole last year, she pointed out, among other things, that the purchase of private assets was largely motivated in terms of 'credit easing', i.e. measures aimed at alleviating turbulence in financial markets.13 Therefore, she believes that an 'exit' should not be determined by how well the central bank's inflation target is met, but by the problems that the measures were aimed at, namely frictions and concerns on the financial markets. I think she has some good points, but, as I have mentioned, I do not think it is easy to make the division into normal quantitative easing and credit easing. There is a simple reason for this. Both the level of the policy rate and different types of risk premiums in the market determine the interest rates that ‘customers’, i.e. households and companies in Sweden, meet.
If, for instance, the real return on a financial asset has been high over a long period of time, this may, according to some research results, affect expectations so that many believe that the return will be as high in the future, despite fundamental factors indicating a lower return. In efficient financial markets, the agents with forwardlooking rational expectations should be able to earn money by taking offsetting positions, but an unwillingness to take risks, difficulties in finding financing or regulations can mean that this is not possible to a sufficient extent. There are for example empirical studies indicating that investors appear to disregard the fact that an economic upswing is usually followed by a downswing and vice versa, which leads to them tending to take greater risks than they should in an upswing and vice versa in a downswing. Another research area concerns imperfections in the credit markets, which lead to the current income and balance sheet having significance for consumption and investment, as lenders and borrowers have different amounts of information regarding the borrowers’ future ability to pay. Borrowers with wealth can thus gain access to more and cheaper loans than others. If asset prices increase, this leads to an increase in  4  BIS Review 62/2006  their opportunities to borrow, which can further push up asset prices. If asset prices rise because of over-optimism that these developments will continue, the accelerator effect may contribute to large imbalances being built up before a correction occurs.

However, at the same time, transition countries and previously strictly-regulated countries inspired by planned economies such as China and India are playing an increasingly important role in the world economy. While the adjustment towards market conforming economies is moving at a rapid pace, there is still a long way to go until conditions in the domestic markets are the same as those in the old industrial nations. Fixed exchange rates, undeveloped credit markets and a high level of domestic saving in emerging economies can, for instance, delay price adjustments and thereby push down both short-term and long-term interest rates in the international capital markets. Increased competition from low-price imports coupled with low import prices for clothes, for instance, have already kept inflation down for several years in many parts of the world and contributed to the interest rates determined by monetary policy being very low. There is thus some risk that demand for credit and asset prices in many countries have been pushed up by expectations of lower interest rates in the future than is sustainable in the long term. We thus find ourselves in a situation where the inflation rate has been pushed down by increased competition from low-inflation economies at the same time as asset prices and indebtedness have increased rapidly. A dilemma ensues here.
William C Dudley: The spread between primary and secondary mortgage rates – recent trends and prospects Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Committee on the Global Financial System (CGFS), at The Spread between Primary and Secondary Mortgage Rates: Recent Trends and Prospects Workshop, jointly sponsored by the Federal Reserve Banks of Boston and New York, New York City, 3 December 2012. *  *  *  Good morning. I’m William Dudley, president of the Federal Reserve Bank of New York. I would like to welcome all of you to the Bank and thank you for participating in today’s workshop. My colleague Eric Rosengren, president of the Federal Reserve Bank of Boston and I asked our staffs to organize this workshop because the topic of the primary-secondary mortgage rate spread is important for current efforts by the Federal Open Market Committee (FOMC) to foster faster economic growth. As I have said on a number of occasions, while the U.S. economy has expanded since mid2009, the pace of the economic recovery has been too slow to make rapid inroads into the spare capacity left over from the recession. As a result the unemployment rate remains unacceptably high. To support a stronger economic recovery in the context of price stability, the FOMC took action at its September meeting to provide additional monetary accommodation.

This spread is influenced by a number of elements, such as the valuation attached to the right to service the mortgages underlying the security, and the annual guarantee fee that is paid to cover the credit guarantee provided by the government-sponsored enterprises (GSEs). The observed widening of the primary-secondary spread likely reflects many factors. Part of this widening is due to higher annual agency guarantee fees which are a necessary and overdue re-pricing of the credit guarantee provided to investors. While these guarantee fees differ by mortgage and by seller, the average effective guarantee fee has increased from 20 to 25 basis points to around 50 basis points today. But this still leaves a significant part of the spread left to be explained by other factors such as changes in originators’ costs and profits. As you all know, the primary-secondary spread is a technically imperfect measure of the pass-through from primary rates to secondary rates. A new study1, by authors including New York Fed staff, adjusts for these factors to come up with a measure of originator2 profits and unmeasured costs, or OPUCs. The basic picture remains the same, with OPUCs at historically elevated levels. The paper evaluates a number of potential factors that could help explain this increase. These include the decline in the value of mortgage servicing rights, credit losses and other costs associated with put-back risk, possible changes in pipeline hedging costs and other loan production expenses.
Tarisa Watanagase: Japan-Thailand – partnership in prosperity Dinner talk by Dr Tarisa Watanagase, Governor of the Bank of Thailand, to the Japanese Chamber of Commerce, Bangkok, 25 March 2008. *  *  *  Ladies and gentlemen, I would like to thank the Japanese Chamber of Commerce for the invitation to speak before you tonight. It has been a year since I gave a talk at a similar function held by the Chamber. I remember we had a lively exchange of ideas then, and I am glad you keep in touch. With long presence in Thailand, the Japanese Chamber has played an active role in promoting common understanding between Thai government agencies and the Japanese business community here. Japan-Thailand economic relationship is both special in breadth and depth. Even a casual observer cannot fail to notice this prosperous partnership. Trade between our nations has doubled in value over the past 5 years; that’s roughly 14 per cent increase per year. On the investment front, Japan’s annual direct investment in Thailand has been steady at close to 3 billion US dollars over the past few years, considerable uncertainties notwithstanding. Japanese financial service providers are lively participants in the Thai financial system. Ladies and gentlemen, Much has happened since we last met. The story of financial disruption is playing out in the US and reverberating across the world. Oil prices have increased by more than 50 per cent.

BIS Review 105/1997  -4Within the CB’s foreign reserves, some positions are being held in the currencies of the countries which are candidates for monetary union membership. These positions consist of securities and money market placements. It is expected that security investments will be converted to the Euro as of January 1st, 1999. Money market placements on the other hand will continue to be transacted in their original currencies until July 1st, 2002. The fixing of the Deutsche Mark rate against Euro, the Euro’s value against other currencies in the international money markets and the depth and performance of the Euro bond market will be important factors in terms of our reserve management policy. In the Euro market, there will no longer be any cross-currency risk and cross currency-induced interest rate differential. However, it is possible that the country risk-induced differential will become more pronounced. Therefore investors must pay attention to which country’s security they are buying when investing in Euro-denominated securities. There are also issues which should be considered by the real sector. In particular those firms which are very active in trades across borders are likely to adopt the value of the Euro in their dealings rather quickly, because firms competing in European markets, in order to make comparison possible, should set their prices in Euro. As I have already mentioned, the CB and the commercial banks have to convert the foreign exchange denominated accounts into the Euro. This is not an easy task and involves changes in accounting systems and data processing.