samchain/econo-pairs-v1 huggingface dataset:
At this point, however, it is relevant to mention that the additional loss of independence which EMU would represent for the formulation of monetary policy in Malta is minimal. This is so because the Central Bank of Malta already has limited freedom of action since it operates a fixed exchange rate regime and exchange controls have been almost entirely removed. This means that the Bank must adjust domestic interest rates in response to movements in capital flows in a way which is consistent with the peg. Too low an interest rate would encourage investors to move out of domestic assets, creating downward pressures on the currency, whereas too high a rate could attract interest-sensitive capital flows which could create upward pressures on the exchange rate. To a large extent, these conditions already govern monetary policy and reserves management in Malta. While the Monetary Policy Advisory Council does take domestic economic conditions into account, decisions on official interest rates are, in fact, primarily conditioned by trends in the official reserves and in the interest rates on the currencies which make up the basket to which the Maltese lira is pegged. Malta’s eventual participation in EMU, therefore, would not involve any significant departure from the current situation in terms of the degree of autonomy enjoyed by the Central Bank of Malta in setting interest rates.

The Central Bank of Malta has been collaborating with the Ministry of Finance and the Ministry of Economic Services in the preparation of the necessary documentation. To date, like all other accession countries, Malta has submitted two PEPs. Conclusion The road to EMU is clearly not an easy one as the tasks involved are both numerous and difficult. For a small central bank with limited resources they represent a formidable challenge. On a policy level,  BIS Review 70/2002  5  there are reasons to believe that the current fixed exchange arrangement should ideally be maintained until Malta adopts the euro. It should also be clear, however, that the Government’s commitment to contain the fiscal deficit and to pursue structural reforms is a vital prerequisite for the sustainability of the fixed exchange rate regime. The importance of fiscal discipline and of product and factor market flexibility will indeed increase as Malta progresses towards EMU. 6  BIS Review 70/2002
It is simply not desirable for spikes in Libor rates, which banks are largely insulated from in terms of their own cost of funding, to nevertheless result in those costs being passed directly onto businesses and households. Interim Financial Stability Report, May 2020 – Box 1 The continued importance of the transition away from Libor, https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2020/may-2020.pdf 4  5  For example see How Correlated is Libor with bank Funding Costs? https://www.federalreserve.gov/econres/notes/feds-notes/howcorrelated-is-libor-with-bank-funding-costs-20200629.htm 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  The factors impacting Libor can be far removed from the risks reflected in the borrower’s own credit worthiness and can introduce significant, and for many impenetrable, volatility in interest rates. Financial markets should not amplify these risks and pass them through to the real economy. So what’s the alternative? So if Libor isn’t a robust and transparent basis for determining funding costs for firms and households – is it possible to create such a benchmark that is sufficiently robust? Well, some years ago now, working groups made up of industry participants in Libor jurisdictions recommended near risk-free rates as the alternative. And more recently we have seen the market develop products using these rates. It is a fact that homes and businesses with loans linked to these rates have seen greater direct benefit from the action taken by central banks during the Covid disruption and have not been as exposed to movements in Libor rates impacted by the scarcity of underlying transactions. Many more deserve the same protection.

This means facing up to transition now, taking action to ensure new issuance moves to robust alternative rates and concrete plans are in place to deal with  7  https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-0623/HCWS307/  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  legacy exposures. The UK Government announcement on its intention to legislate and the finalisation of the ISDA protocol are important steps in the ‘endgame’ becoming clearer. There is more to do and work is underway to remove the remaining barriers to transition. After John has spoken we’ll be joined by the chairs of the UK and US industry groups who continue to lead this work, building consensus on key areas such as product conventions and cash fallback mechanisms. Hopefully, the message is now clear to those who have remained on the side-line: this is a necessity not a choice and there are eighteen months left to transition. And, for the avoidance of doubt, I’m taking it that eighteen months in Libor is past the middle of the seventh, so you don’t need to get up now, stretch and sing ‘Take Me Out to the Ball Game’ before John speaks. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9
Dimitar Radev: Decision about the euro is strategic, not conjunctural Interview by Mr Dimitar Radev, Governor of the Bulgarian National Bank, for Investor Digest, October 2019. * * * Mr. Radev, how would you assess the results of the asset quality review that the European Central Bank (ECB) conducted on six Bulgarian banks? How is the subsequent communication with Frankfurt in view of the goal of entering ERM II? The results are not surprising. They correspond to our own assessments. The communication with the ECB was and remains excellent both when it comes to the work related to the asset quality review and stress test, and when it comes to the overall process of preparing to join ERM II, the Single Supervisory Mechanism and the Single Resolution Mechanism. By definition, the parameters of such stress tests are markedly conservative. The ECB’s approach, however, included some quite unlikely scenarios, such as increasing corporate tax to 30% in the next three years. This could be a negative development for countries like Greece with its 28% tax, or Spain with its 25%, but it seems unrealistic for Bulgaria with its 10%. Wasn’t it logical for the European Banking Authority’s methodology, which was developed for the stress tests on the largest Western European banks a year ago, to be adapted to the conditions in Bulgaria? The technical parameters in the methodology of the stress test’s baseline and adverse scenario are the same as those applied across all the member states by the European Banking Authority.

The second remark is that removing anticipations of state support/bailouts is a process that may take time and which must be handled with extreme care. The unexpected imposition of losses on some type of creditors to resolve problems in some banks can lead to shifts in expectations of public guarantee for other institutions, and create contagion and funding stress at other banks. The case of Cyprus was a perfect illustration of this. The difficulty is to guide the evolution in expectations over time, and avoid abrupt shifts that would increase financial instability and ultimately undermine the objective of the reforms. This ‘transition problem’ is in my view critical, and has been overlooked in many discussions. This conference is organized so as to facilitate exchanges with the audience. Therefore, I encourage you to be fully involved in the discussions and wish you fruitful debates. I now leave the floor to Augustin Landier from Toulouse School of Economics, one of the organizers of this conference with Regis Breton and Laurent Clerc from the Banque de France Financial stability directorate, who will chair the first session of the conference. BIS central bankers’ speeches  3
When I weighed together the great uncertainty about developments in the financial markets and the risk for a weaker development abroad with the Swedish economic outlook and the risk of inflation in Sweden remaining high, my conclusion was that the interest rate should be left unchanged. I would like to emphasise that it should not be regarded as though I wished to attach less weight to the inflation target. It was and is more a question of how much time it will take to bring inflation back on target. I also pointed out that the Riksbank has raised the interest rate in a number of stages since January 2006 and that these increases have not yet had a full impact on the economy. What has happened since the monetary policy meeting? So far my assessment is that outcome data and indicators in the euro area are largely in line with the assessment in the main scenario of the Monetary Policy Report. My opinion is also that the indications of weak US growth at the beginning of this year and the continued problems on the housing and property markets are in line with the assessment in the main scenario. In the short-term perspective the assessment does not differ from my own. I am however more concerned that it will take longer before the recovery gathers pace. Swedish GDP growth during the fourth quarter last year was somewhat stronger than expected in the Monetary Policy Report.

The rapid upturn in inflation last autumn was largely due to rising energy and food prices, a reflection of the fact that prices rose rapidly on the world market. At the monetary policy meeting I pointed out that it is not possible to immediately counteract such rapid price impulses from abroad with monetary policy. Quite simply, it must be allowed to take some time. In the Monetary Policy Report the rapid price increases are to some extent assessed to be of a temporary nature. If world market prices do not continue to rise at the same rapid pace in future, inflation will fall back again. This is also what is forecast in the main scenario of the Report. However, to some extent, it also concerns the effects on inflation which risk becoming more permanent and which may need to be counteracted with monetary policy. When inflation rises and is above the target, as CPI inflation now is, it is important that it is not allowed to become entrenched and become permanently high. The risk of this increases if inflation expectations rise, and that is exactly what has occurred. Inflation expectations have risen not just one year ahead, but even two and five years ahead, which is troublesome. The monetary policy decision The upturn in inflation and in inflation expectations in the slightly longer term were also factors that indicated the interest rate should be raised at the monetary policy meeting in February.
They helped underpin the international monetary framework (which in that era meant closely-managed exchange rates, with or without the gold standard); and  3. They provided channels through which funds could continue to flow in conditions of financial emergency. Much has changed since 1917. Sterling and the dollar have traded places as the world’s leading reserve currency. The gold standard is a distant memory. The major global currencies have swapped fixed for flexible exchange rates. And the scale and sophistication of international trading and capital markets, and the number and diversity of reserves-holding countries, have expanded greatly. But amidst all that change, those three goals of financial co-operation between central banks remain fundamentally the same. Of course, the central banks of today collaborate on a much wider range of policy, supervisory and macro-prudential issues. But at our heart we are still banks – and it is our balance sheets, and the financial interdependencies they give rise to, that frame everything else we do. It is therefore an honour to celebrate with you the centenary of the events that really gave birth to it all. In my remarks today, I want to give a Bank of England perspective on those events, to describe the services that we provide today, and to touch on some of the challenges and opportunities for the future.

It is only in recent decades that its focus has drifted toward its scientific dimension. In any case, I prefer to think of economics as being closer to medical sciences (Harberger, 1993), as it diagnoses, analyzes evidence and proposes treatments. It is different from physics because physics does not deliver prescriptions, at least not directly. Hence the importance of the interaction between science and practice. Economics has an additional complication, as it is a social science trying to explain human behavior. The emphasis put on rigor and solid theoretical fundamentals has been a positive development, because making policy recommendations requires a good and accurate diagnosis of reality. Like in the past, we could have extensive, complex models, with many sectoral interrelations, based on statistical estimations and calibrations. But if the models aren’t conceptually well-formulated and are based only on statistical patterns, their usefulness is limited. This was the great contribution to economics by the rational expectations revolution and, in the policy field, by the Lucas critique. Only preferences and technology are invariant to policies, while the resulting behavior of agents is not; therefore, policies will ideally be evaluated with models that specify both preferences and technologies. 1 Nonetheless, the current crisis has revealed that models are limited to deal with all complexities of the real world.
I would stress that all this does not mean we think consolidation extends 'too big to fail' status; but it does mean that central banks and other authorities have to ensure that they are monitoring how consolidation is affecting risk and financial interlinkages. They should also think ahead and examine matters such as their own operational expertise, information flows with other bodies, legal processes and other procedures, in the event of a complex wind-down. (d)  Consistency  The final point I want to highlight is the question of consistency of regulation between different types of financial intermediary. It makes no sense to introduce a Rolls Royce system of capital adequacy regulation for banks if we have not considered the ramifications for the financial system as a whole, in the light in particular of the very different capital frameworks which apply to insurance companies. We may find that our new rules are simply arbitraged away, for example using credit risk transfers to insurance subsidiaries, or asset securitisation sales to third party insurers, or credit insurance and derivatives sold by insurers. In the long run, both our financial stability and financial efficiency objectives could be undermined by this: financial stability if we find that these credit risk transfers are not robust, or that they result in potentially systemic strains in the insurance sector; and financial efficiency through the extra costs of arbitrage processes.

Peter Praet: Interview in Börsen-Zeitung Interview with Mr Peter Praet, Member of the Executive Board of the European Central Bank, in Börsen-Zeitung, conducted by Mr Detlef Fechtner and Mr Mark Schrörs on 11 February 2019 and published on 18 February 2019. * * *  Mr Praet, how badly is the euro area economy doing? We have lately seen a marked increase in the risks for the euro area economy. That is why we revised our assessment at the last meeting of the ECB’s Governing Council in January. We see the constellation of risks surrounding the economic outlook, in other words the balance of risks, as tilted to the downside. That is a significant change in our communication and reflects concerns about the general economic situation. At the same time, however, we said that our baseline scenario has so far remained intact. In March we will have new macroeconomic projections from ECB staff and we will then re-examine our assessment. The December projections for 2019 to 2021 forecast growth of 1.7%, 1.7% and 1.5% and a gradual rise in inflation to 1.8% in 2021 – so approaching the ECB’s target rate of below, but close to, 2%. That surely can’t be upheld now, can it? I expect that the projections for the near term, in particular, will be revised downwards. The data since December have been much weaker than I had expected. But our discussion in the ECB’s Governing Council does not focus so much on the short-term perspective.
It had shown an increase of 3.7% in December 1997. Financing raised on the domestic markets progressed vigorously, with the year-on-year advance standing at 9.2% in December 1998, after 6.6% a year earlier. Against a background marked by uncertainty surrounding the international environment and by prospects of a euro area-wide slowdown in activity, on 3 December 1998 the Monetary Policy Council of the Banque de France, in close dialogue with the other members of the European System of Central Banks (ESCB), decided to cut its main key rate, which had been set at 3.30% since October 1997, to 3.0%. This decision was inspired by three considerations: – – –  the need to ensure the cohesion of the euro area in the best possible conditions; the need to organize the convergence of short-term rates towards the lowest rates in the area, i.e. in particular French rates; the need to choose the level of key rates that was most appropriate at the time of entry into the euro. This decision constituted a further stage in the process leading to the transfer of responsibility for monetary policy to the European System of Central Banks as of 1 January 1999. In fact, the rate applying to the first main refinancing operations of the ESCB was set at 3% on 22 December 1998 by the Governing Council of the ECB.

The unemployment rate fell from 12.2% to 11.5% from the end of one year to the next. Against the backdrop of quickening growth, inflation was brought further under control. The year-onyear rise in consumer prices stood at 0.3% in December 1998, after 1.1% in 1997, and thus met the objective of less than 2% set by the Monetary Policy Council. This was the lowest rate of inflation recorded since 1954. One of the main factors in the slowdown in price rises was the fall in the price of oil and other commodities. “Underlying” inflation, which reflects the fundamental trends in the economy, showed a slightly more sustained progression than the consumer price index. According to France’s National Institute of Statistics and Economic Studies, INSEE, it posted a year-on-year rise of 1.1% in December 1998, the same as in December 1997. According to the harmonized index of consumer prices (HICP), which is the measure of inflation in the euro area, France is one of the three best-performing countries in terms of inflation: French inflation stood at 0.7% as an annual average in 1998, compared with 1.1% for the euro area. In the course of 1998, the franc remained constantly above its central rates vis-à-vis the other most credible currencies of the European Exchange Rate Mechanism. The goal of a stable external value for the franc—which was the external intermediate objective of French monetary policy over the last five years—was thus achieved. This went hand in hand with the maintenance of the competitiveness of the French economy.
It is clear that, at the same time as the long tail of companies have been stagnating, they have been sky-rocketing. Or put differently, the distribution of UK firm-level performance has itself been widening or bifurcating over time. This pattern of productivities goes some way towards explaining, at least in an arithmetic sense, the large and widening divergence between regional levels of productivity. High-productivity regions have more of the frontier firms, and fewer of the long tail, than low-productivity regions. Or, put differently, high-productivity regions have greater numbers of companies from sectors with high productivity – for example, high-valued added chemicals companies, like those in Teesside. Charts 18 and 19 plot the estimated distributions of labour productivity, measured as output per employee, at the firm level across different regions and different sectors using the ONS ARDx dataset. What is striking is that differences in productivity within-region and within-sector are far larger than the differences across-region and across-sector. Every region and every sector has a range of both high and low productivity firms, with huge overlaps across regions and across sectors. There are, of course, some regions, such as London, and some industries, such as Information & Communication and Professional & Scientific services, which have a larger number of frontier firms in the far right-hand side of the distribution. But the North-East clearly also has its own set of productivity pioneers. This underscores the value of the Mayfield Commission’s benchmarking work.

Male life expectancy in London and the South East (at around 80 years) is 2 to 3 years longer than in these parts of the UK. 13  So this is a story of wide regional differences in incomes and well-being sourced, to a significant extent, in regional differences in firm-level productivity. Those differences are themselves rooted in differing levels of investment in machines and people, in technology and skills, in physical and human capital. We have red and blue firms hiring red and blue workers, resulting in red and blue car levels of income and productivity. Which is the North-East? Levels of GDP per head, wages and productivity in the North-East are, respectively 25%, 8% and 11% below the UK average. Levels of physical and human capital accumulation are also lower. Levels of unemployment are currently 1.3 percentage points higher and 4.4 percentage points higher for young people. North-Eastern households own half as many assets and fewer cars than South-Eastern households. Redcar is a Red Car region. The Role of Monetary Policy  These maps lay bare both some of the challenges, and the opportunities, facing the UK economy. 13  See ONS ‘Life Expectancy at Birth and at Age 65 by Local Areas in the United Kingdom’, available here. 7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  The challenges include the fact that growth in income and productivity at an aggregate level has recently been slower than in the past - the economic pie has not risen rapidly.