samchain/econo-pairs-v1 huggingface dataset:
And I will also touch on what role other policies might play in supporting growth, here in the North-East and nationally, in particular when it comes to boosting skills, innovation and productivity. A Two-Car Economy I want to set the scene by describing an imaginary economy. Now I know what you are thinking – typical economist, head in the clouds, aimlessly theorising without any grounding in the real world. But bear with me on this one, as I think my stylised economy might help in making sense of the real world to which I promise I will then return. This imaginary economy comprises, for simplicity sake, two regions - Red Car region and Blue Car region. These two regions have quite different economies. The economic make-up of their firms and households is  1  BBC News October 2015, ‘SSI Redcar Steelworks to be shut’. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  different in terms of their production processes and spending patterns. So too, as a result, is the level of activity, income and productivity in the two regions. Red Car region comprises a set of firms who make red cars. To do so their production processes rely on few machines and lots of workers. Because there are few machines, the workers employed do not need especially high skills. And because firms employ lots of these lower-skilled workers, their levels of productivity – the number of cars produced per worker – is relatively low.

24  It suggests a widening  – or bifurcation - of this distribution, with a small set of frontier firms whose productivity growth continues apace but a long tail of laggard firms whose productivity has effectively stagnated. The UK broadly matches that picture. Chart 17 plots some percentiles from the distribution of productivity (output per worker) at the firm level, based on a sample of 30,000 companies from the ONS Annual Respondent Database (ARDx) since 2002. This database combines data from the ONS Annual Business Survey and employment surveys, which are used to inform the aggregate National Accounts and Labour Market statistics, and allows us to analyse what is going on at the firm level. Several features are striking. First, it is clear that at least three-quarters of all firms in the sample have seen productivity flat-line over the past 15 years. There is a long tail of companies who have, at least in efficiency terms, stood still. 21 22 23 24  See May (2016), Clark (2016) and House of Commons (2016). CBI (2016), HMT (2016). Mayfield (2016). OECD (2015). 14  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  14  Second, it is only firms in the upper echelons of the productivity distribution that have seen any growth and only those in the top 1% or above who have seen rapid growth. And this growth has been rapid, with the productivity of the top 1% of companies increasing by on average around 6% per year since 2002. These are the frontier firms.
First, if the affected institution provides services that are of crucial importance to the national economy and which are generally indispensable. Second, if these services cannot be provided by other market participants at short notice – in other words, they are not substitutable. How pronounced are these two aspects in the banking sector? First, banks generally provide a wide range of essential services for the economy, such as lending or payment services. Second, these services are not easily substitutable, particularly at big banks. Banks are closely interconnected with each other, and with the rest of the economy. The result is that problems at one bank can spill over to other banks and the rest of the economy. The larger the bank and the higher its market share, the smaller the likelihood that other market participants will be able take over important functions at short notice in the event of a crisis. Thus, a bank’s size and market position are important indicators for assessing its systemic importance. Specific parameters are the bank’s share of domestic lending and deposit business, and its importance for payment transactions. Another widely used measure of systemic importance is the ratio of balance sheet total to GDP, as this is a good indicator of the bank’s interconnectedness and the (lack of) substitutability of its services.

BIS Review 37/2004  1  Spain’s relationship - and that of the Banco de España - to the International Monetary Fund is certainly today very different from what it was in 1958, when our country joined the Bretton Woods institutions. In the early years of its participation in the Fund, Spain received financial and, most importantly, technical assistance from this institution, as part of the process of external openness and liberalisation that allowed its economic take-off in that period. The Fund’s excellent technical guidance in this process supported those economic sectors in favor of liberalization, who nevertheless met notable resistance in pushing through their programme of reforms. I believe that Spain, since then, has a considerable debt of gratitude with the International Monetary Fund. Currently, the framework for our relationship to the Fund is very different. As part of the euro area, monetary policy discussions take place in a broader context spanning the whole of the euro area. As a member of the Eurosystem however, the Banco de España remains deeply involved in such discussions. In other realms, relations with the Spanish authorities remain on a bilateral footing, as is notably the case with the close contact each year on the occasion of the analysis of the Spanish economy via the Article IV report. That said, the European dimension is becoming increasingly important.
There is nothing to suggest that the rate of and pressure from these changes will ease off in the years ahead. On the contrary, international integration seems to be becoming more intense. The establishment of EMU means that this trend will accelerate. EMU affects the financial system The introduction of the single currency will affect the financial system in various ways. The most obvious change is the end to exchange transactions between the national currencies in the euro area. This also means an end to forwards and swaps in these currencies. By itself, this will leave its mark on the earnings of European banks. The coming of the euro will also affect financial activities in Europe more profoundly and may necessitate a number of changes. The euro area will constitute a larger and more uniform market with a population of about two hundred million. This market, moreover, is likely to attract investors from other European countries and other parts of the world. Via growing competition, a larger market normally leads to lower costs and increased liquidity. With more investors and the elimination of exchange risks, it will cost less to diversify savings by placing them in more countries. In other words, savers in one country will transfer some of their assets to other countries. This process has, in fact, already begun. Briefly, then, all at once there will be a much larger and much more liquid European capital market that in time may resemble the US market in size and nature.

First, increasing the number and diversity of firms that can directly access central bank money helps to reduce financial stability risk from events such as market wide shocks or a single firm failure. Second, it promotes competition and innovation in payments. Firms that have direct access to payment systems can benefit from faster transaction times and reduced individual transaction costs. By extending these benefits to a wider range of firms, the Bank hopes to encourage a greater diversity of players in the payments market, thereby encouraging innovation and competition through development of new business models, new products and services and ultimately cheaper and more efficient payments. This is an ambitious Programme - and rightly so. The Bank is on track against published milestones. Having defined the Programme scope, with input from the payments industry, we are now running a competitive procurement process under the Official Journal of the European Union to appoint a Technology Delivery Partner. They will work with the Bank on the design and build of the core settlement engine. We plan to enter the contract with the Technology Delivery Partner in May 2020. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  We then move to delivery, with the first technology changes in the first half of 2022. In light of other international migration plans, the Bank is revisiting its approach to the introductory phase of ISO 20022 implementation in 2022 – in particular on how we can support early adopters of enhanced ISO 20022 data.
The final part will be a discussion about the challenges ahead. Ladies and Gentlemen, Since my previous FCCT address, things have changed dramatically. Two years ago, the main policy issue surrounding the economy was the sharp acceleration in inflation due to drastic increases in oil prices. Two months after my talk, starting with the fall of Lehman Brothers, the world went into the deepest recession never seen since the Great Depression. Thailand was not spared, as the Thai economy last year experienced negative growth for the first time since the 1997 crisis. In tandem with the slowdown of the global economy, oil prices collapsed and inflation was no longer an issue. Over the past two years, policy focus would be on how to restore the stability of the global and individual country’s financial systems and how to prevent such a systemic crisis from happening in the future. In other words, the spotlight has turned from price stability to financial system stability, or in short, financial stability. 1 The global financial crisis has a significant impact on central banks’ thinking of economic and financial stability policies in three major areas. First, it is now widely accepted that monetary policy also needs to take care of financial stability concerns. The pursuit of price stability alone is not enough to ensure a smooth progress of the economy.

These prerequisites must also be backstopped by strong policy credibility, the second area of priority. 2. Maintaining macroeconomic policy credibility  In its quest to provide public services, the policymakers must avoid being the source of harm. International experience is filled with cautionary tales of how a lack of policy discipline could lead the economy awry. Over-bloated and inefficient government increases risks of unsustainable public finance, and can sow the seeds for political conflicts. Lax monetary discipline is associated with hyperinflation and financial instability. Maintaining macroeconomic policy credibility and discipline must be an integral part of economic reform in Thailand. Policy credence is not an independent choice, but is shaped by the overall institutional setup. Institutions are the set of rules and norms that governs the incentives of economic agents and constrains their behaviours. Political developments, strength of the legal system, property rights enforcement, quality of workforce, degree of corruption are but some aspects of the institutional environment. They all interact with the policymakers’ ability to pursue their objectives credibly. Institutions evolve via a mixture of history, will power and luck. A combination of factors at critical junctures can determine the path of institutional change. Thailand must seek to make the most of the current windows of opportunities, to build on reform momentum, and promote a virtuous circle of institutional development. The ultimate goal is to have a political setup that is in accordance with international standards, with a stronger institutional framework to promote a credible and effective public policy.
The Riksbank has defined this in terms of a target for inflation: to keep inflation at 2 per cent, with a tolerance for deviations of ± 1 percentage point. In practice the Riksbank’s conduct of monetary policy normally involves adjusting the repo rate with a view to influencing demand in the economy. By influencing borrowing costs, the incentives to save, exchange rate developments and thus exports and imports, etc. the repo rate has an effect on aggregate demand in the economy and gradually also on inflation. It is generally held that a rate adjustment normally takes roughly 1-2 years before it has its greatest impact on inflation through these different "channels". That means that our interest rate decisions must be based on a forecast of economic and inflation developments in the years ahead. Even though the current inflation rate is not the decisive factor for our interest rate decisions it is, of course, important nonetheless since it constitutes the starting point for our inflation forecast, which is the key element underpinning our decisions. To make the Riksbank’s monetary policy strategy clear it has been described in terms of a simple policy rule: if the forecast points to an inflation rate above 2 per cent 1-2 years ahead the repo rate should normally be raised, whereas it should normally be lowered if inflation is forecast to be below 2 per cent. BIS Review 25/2005  1  But this policy rule cannot be applied mechanically. That is why “normally” is included in the wording.

Owing to the amendments to laws adopted by the State Duma, the requirement for the testing of non-qualified investors wishing to purchase complex products will become effective as early as autumn, that is, six months earlier than initially scheduled and discussed. We are now authorised to establish the rules for selling financial products to ensure that market participants do not sell complex products to individuals who are unable to comprehend them, or products involving non-transparent conditions of returns, which makes it impossible to assess the risks of investment. Moreover, the new law allows us to set the rules for selling not only the investment products we discussed, but actually any financial products and services. Already this year, we will stipulate the main rules for the interaction between financial institutions’ employees and consumers and the rules for information disclosure. We will also evaluate how well they are complied with in the course of test purchases. It is no secret that financial institutions’ employees selling products often focus on their KPI, which is the basis for their personal bonuses. This KPI is the amount of products they sell and they might not care about the quality of products they sell to people. Of course, we need to alter this system. The protection of retail investors is an important but by far not the only area where we believe it essential to enhance financial consumer protection.
BIS Review 69/2010  3  At a crisis meeting on 8–9 May, EU finance ministers therefore agreed on a EUR 500 billion European Financial Stabilisation mechanism to support countries unable to borrow in the market. The largest portion will be provided through loans guaranteed by individual euro area countries. The IMF will provide support in the form of loans upon application from an individual country, perhaps up to a total of EUR 250 billion. Several countries announced sharper spending cuts. The ECB will buy government and other bonds and offer extra loans to banks to promote the smooth functioning of markets. Moreover, the Federal Reserve has entered into agreements with other central banks to re-establish temporary dollar swap facilities to avoid failure in dollar funding markets. 3. Norwegian economy  To mitigate the effects of the financial crisis, central bank key rates were cut sharply in 2008 and are still close to zero in a number of countries. The key policy rate in Norway was also reduced from autumn 2008. Norges Bank also implemented a number of extraordinary measures to improve credit flows. Banks were provided with longer-term liquidity and direct access to US dollar liquidity, and collateral requirements for loans from Norges Bank were relaxed. On the advice of Norges Bank and a proposal from the Ministry of Finance, the Storting decided that banks would be entitled to exchange covered bonds for government securities.

I don’t think the time has come for this, either at a conceptual or practical level. But rather, I think that we need to develop the existing institutional system for European banking supervision in order to ensure that all of the possibilities for co-operation and convergence are fully taken advantage of. The main policy objective at this stage should be to enhance cross-border supervisory co-operation in order for supervisory action to be perceived as unified. This system should be built on four levels. At the first level, we have the competent supervisor of each banking institution (whether this is the home or host supervisor in the context of the group), which will have to fulfil its responsibilities and accountabilities, on the basis of the powers and obligations it has been given by the national parliament and legislators. The second level consists of bilateral co-operation between the supervisors of internationally active institutions. This has long been the bedrock of effective supervision in the context of increasing internationalisation, and will continue to be essential in the future. Multilateral co-operation forms the basis of the third level. This is an aspect that has become progressively more significant in recent times, and which will grow in importance in the coming years. Both bilateral and multilateral arrangements will be increasingly necessary in the context of Basel II, where, as we have already discussed, the consolidated supervisor will be responsible for co-ordinating the supervisory process in relation to assessing applications to use the advanced approaches.
With consumer price inflation remaining high, this pattern is likely to continue through this year. Most forecasters are assuming that there will be limited upward pressure on wages from high inflation in the short-term, partly because of the downward influence of relatively high unemployment and partly because the rise in inflation is expected to be temporary. The latest consensus forecast is for average earnings growth to pick up to 3% by 2012 from the current underlying rate of increase of 2.3%. However, Income Data Services are already reporting that pay settlements have moved up to 2.8% in the private sector, pushed up by a number of pay deals linked to the Retail Prices Index. In my judgement, there are upside risks to both inflation and consumption growth from a stronger rebound in wage growth as the recovery proceeds. This is one of the reasons – though not the only one – why I believe that the current Inflation Report forecast that inflation will fall back to the 2% target is relatively optimistic. The behaviour of wages and consumption will therefore be an important influence on the outlook for both growth and inflation over the next couple of years, and this is clearly an area that the Monetary Policy Committee is monitoring closely. With imported price pressures and VAT adding to inflation in the short-term, we should not be surprised to see a squeeze on real incomes and relatively subdued consumer spending in the first half of this year.

As a small, open economy, Sweden must in principle accept the international real interest rate as a given. Monetary policy is not able to affect the real interest rate to any great extent in the longer run, but it affects inflation and inflation expectations. In recent years, the IMF and other forecasters have revised down their forecasts for GDP on several occasions. If one looks at real interest rates, these began to fall even before the financial crisis and real interest rates have also fallen during periods of higher growth. Opinions differ with regard to the causes of this slowdown. The more pessimistic line talk about secular stagnation, where savings have increased and willingness to invest has declined as a result, for instance, of the composition of the population, of growing income gaps and weak technological innovations. This has in turn pushed down the interest rate level compatible with normal resource utilisation. The other more optimistic line say that remaining effects from the global financial crisis, such as deleveraging and increased political uncertainty, explain the slowdown but that these effects are transitory. 1  1  See Deputy Governor Henry Ohlsson’s speech on 18 March 2016 “Decision today, consequences far into the future”, for a longer review. BIS central bankers’ speeches  1  Lower real interest rates and inflation But it is not merely real interest rates that have fallen. In recent years, inflation has also shown a downward trend.
We should of course expect to see the amount of assets decline, and this will be matched by a decline in the overall stock of liabilities. Most of this decline in liabilities will likely take place as a decline in bank reserves. The size of the balance sheet will be “normalized,” in Federal Reserve parlance, when the FOMC judges that the Federal Reserve is holding no more securities than necessary to implement monetary policy efficiently and effectively. At that point, the size of the balance sheet might well be “normalized,” but its composition will probably not be. Panel 2 shows a stylized summary presentation of how the Federal Reserve’s assets and liabilities might look when the size of the balance sheet is normalized, drawn from the “median scenario” included in the July 2017 update to our annual report, “Open Market Operations During 2016.” This presentation is largely based on the median of market participants’ surveyed expectations collected in June, along with some staff modeling to fill in the details, and as such is not an FOMC projection or forecast. That said, it provides a useful way to illustrate my point. 3 / 15  BIS central bankers' speeches  On the asset side, in this median scenario, the portfolio would still contain a substantial allocation to agency MBS at the time of normalization, even though the FOMC has, as I noted earlier, indicated a preference to hold primarily Treasury securities in the longer run.

I am also confident that the Federal Reserve is well prepared, both operationally and analytically, to identify, understand, and address unforeseen circumstances over normalization as directed by the FOMC. Finally, by accomplishing all these things, I am confident that the FOMC’s policy normalization plan should help promote the ongoing economic expansion. Clearly, the 2013 taper tantrum should leave any observer cautious in assessing a central bank’s ability to normalize its balance sheet smoothly. Those of us who work at the Federal Reserve certainly were. I believe the FOMC’s plan carefully takes into account the range of potential explanations for the taper tantrum, in particular through its emphasis on gradualism and predictability. Early signs on this front are encouraging, with financial market volatility around recent balance sheet announcements quite modest relative to what we saw in 2013. It’s much too early to declare success. However, should this stability continue, I believe the FOMC’s approach may offer useful lessons to other central banks which anticipate reaching a time of transition in their policy stance. In particular, the FOMC has aimed to provide as much transparency as it can in an effort to underscore its intent to achieve an uneventful normalization of the balance sheet. I believe that this level of transparency has been of great importance. 1 I would like to thank James Egelhof for his assistance in the preparation of these remarks, Adam Biesenbach  and Romen Mookerjee for their assistance with data, and colleagues in the Federal Reserve System for numerous insightful comments and suggestions.