samchain/econo-pairs-v1 huggingface dataset:
Today, I want to talk with you first about the Fed – what we do and why we do it. Then I’ll provide some thoughts about the economic outlook nationally and locally. How the economy performs is important in many ways. At the personal level, for example, it affects your family’s finances and students’ job prospects at graduation time. Collectively, it affects the potential of our nation to confront and deal with the many challenges we face. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC. What the New York Fed does By way of introduction, I will briefly review what the New York Fed does and what makes my job so interesting. I am vice chair of the FOMC, which meets eight times a year in Washington to set interest rates and make other decisions about monetary policy. The members of this committee all strive to set policy to advance the mandate given to us by Congress to promote the maximum level of employment consistent with price stability. Sometimes we have different views on the specific policy choice at hand, and you should view this as completely appropriate: these are hard questions – particularly at times like this. In fact, I think we make better decisions as a committee because we don’t all think alike.

But we are united in our commitment to our dual mandate and in our belief that Fed independence is essential to the public interest, because it allows us to make tough decisions insulated from short-term political pressures. At FOMC meetings, each Committee member presents a current outlook for his or her region and the nation. For these assessments, we consult our researchers and add critical information that we learn from listening to our boards of directors, regional advisory councils and community leaders, such as you and others I’ll meet on this visit. This trip includes a meeting with the Long Island Housing Partnership – and a visit to some distressed neighborhoods, a tour of the D’Addario string factory and lunch with its workers; and concludes with a tour and meeting at the Brookhaven National Laboratory. BIS central bankers’ speeches  1  At the New York Fed, we continually track conditions in our District, and we have created a number of tools for that purpose. For example, my staff produces monthly indexes of economic activity for New York City, the entire state of New York, and New Jersey. These indexes are essentially measures of local output – similar to gross domestic product, or GDP, at the national level. These measures provide a more complete gauge of activity than the employment report, which is another important metric at the state level.
However, there is also a risk that uncertainty about the future of the Swedish economy will result in households reducing consumption. At present, household’s financial savings are insignificant. In this respect, the situation is similar to the United States although the problems there are more serious. Uncertainty about the development of the krona remains great, however. There is general agreement that the krona is fundamentally undervalued – this has contributed to creating the surplus in the current account that has reduced our foreign debt in recent years. When the foreign debt starts to reach levels that are more sustainable in the long run, the krona should be strengthened. There is thus no reason to depart from the Riksbank’s assessment that the krona will appreciate in the long term. However, asset prices and exchange rates are sensitive to changes in expectations. And just now it seems that the krona is being weakened by the focus on the foreign exchange market on the expected capital outflows, which will be the result of pension funds being invested abroad. Reduced interest in purchasing Swedish shares is considered by others to be the explanation why the krona is so weak  BIS Review ? ?/2001  5  just now. During the years with a floating exchange rate, we have noted short-term fluctuations in the exchange rate do not seem to have any great effect on domestic prices. There is only an effect on prices if businesses believe that changes in the real exchange rate will be of some duration.

Deregulations have also led to increased competition in many areas. The labour market also seems to operate more flexibly than before. 4  BIS Review ? ?/2001  Financial savings in different sectors in Sweden, per cent of GDP Per cent 8  6  Private sec tor  4  2  0  -2  C urrent acc ount  -4  -6  Public s ector  -8  -10  -12  -14 198 0  198 1  19 82  1983  1984  1985  1986  198 7  198 8  19 89  1990  1991  1992  1993  1994  199 5  199 6  1997  1998  1999  2000  And it is considered that there is considerable potential for growth with regard to making use of IT development. This is perhaps more true for Sweden than for the US economy. In the IT sphere, Sweden is a long way forward although to date development has not affected productivity in the whole of the business sector to the same extent as in the United States. Neither have we seen such a strong growth in investment as in the United States. It will be a while before the new technology is implemented and used to the full although it will be first then that major benefits for the whole economy can be expected.
For example, rising interest rates carry the risk of negative revaluations in banks' balance sheets. Under these conditions the BNB will continue to follow a conservative prudential policy aimed at further strengthening the capital position of banks through a series of microand macro-prudential measures. Therefore, at least in the short term, we see no reason to relax our prudential policy. The path to the euro area The path to the euro area has the potential to become a catalyst for processes that consolidate the political and macroeconomic framework. We have already witnessed such beginnings. Most recently, the parliament adopted a decision with a near-constitutional majority to speed up the process of preparing for the introduction of the euro with a target date of 1 January 2024. It is difficult to find another topic today that receives such impressive political support. The fulfilment of the nominal, so-called Maastricht, criteria – a mandatory condition for joining the euro area – implies the implementation of policies that are good for the country, even outside the context of the euro area, and thus would help to consolidate the macroeconomic framework. These policies are aimed at curbing and reducing inflation – the big topic of the day, as well as fiscal discipline, maintaining long-term interest rates at a healthy level for the economy, and maintaining currency stability. Despite the problems we face, Bulgaria is still positioned well in terms of the Maastricht criteria.

The cure in such cases is to achieve primary surpluses in the future, and this can be done in two ways: cutting fixed expenditures or raising taxes. We know, even from our own experience in the 1990s, that this process is painful. On the other hand, there is real danger of conflict between the objectives and directions of the fiscal and monetary policies. Tightened monetary conditions and loosened fiscal conditions have contrary macroeconomic effects, at least on demand. To this we could add the significantly delayed structural reforms which could have supported the resolution of supply-related problems, but have not yet been brought into the focus of the budgeting debate. The combination of these two factors would seriously hinder the endeavours to limit and keep inflation down; and what is more, it would create conditions for return to the macroeconomic imbalances of the recent past. Such a development, inter alia, would have a strongly deleterious effect on the businesses and banks in Bulgaria. Therefore, in terms of greater predictability of the macroeconomic environment dynamics, now one of the major economic policy tasks is to try to synchronise as much as possible the monetary and fiscal conditions in Bulgaria. In the language of  2/5  BIS - Central bankers' speeches  budgeting, this means accomplishing fiscal consolidation that can be measured by a concrete number: a budget deficit not higher than 3% of GDP.
However, in some situations it may be necessary to allow a little longer time than two years for inflation to return to target, in order to avoid causing unnecessary fluctuations in the real economy,” continued Mr Öberg. “My experiences of forecasting work are that there is considerable uncertainty linked to longer-term forecasts. This makes it important to take into account different types of risk when making monetary policy decisions. One risk that I envisage is connected with the strong developments in the real economy – the strong growth and rapid increase in employment. We will probably attain a fairly normal capacity utilisation level in the labour market in the not too distant future, while the central wage agreements for the greater part of the labour market will be renegotiated next year. In the February Inflation Report, underlying domestic inflation was calculated at up to 3 per cent at the end of the forecast period, which reflects an expectation of relatively high domestic cost pressures,” said Mr Öberg. “In my opinion, there can be some risk that the expansionary monetary policy will overly reinforce the economic upswing and allow domestic prices and costs to rise. It could have more long-term consequences for price-setting and wage formation. The policy rate is still below what can be regarded as an average figure over a long period of time. The question is at what pace it should be raised to a more normal level. This will in turn depend on how the economy develops,” considered Mr Öberg.

This regulatory tool has considerable potential to foster financial inclusion and it can signal to Fintech industry participants that the regulator is open to innovation. All these issues will be part of the first National Fintech Strategy, as one of our strategic goals in the period ahead. As you can see the agenda is ambitious, but the idea is to react proactively even though the market demand is still modest. While no one can predict the future with certainty, we know one thing for sure – digital transformation is here to stay profoundly changing the way we live and work. Looking forward, I see three main priorities:  3/4  BIS - Central bankers' speeches  First, we should balance between enabling financial innovation on the one hand and addressing challenges to market and financial integrity, consumer protection, and financial stability on the other. Second, close cooperation between regulators is of utmost interest. It includes international cooperation as well, considering that innovations could have cross-border implications. Third, there is a need for strong industry engagement and commitment by all stakeholders to enable efficient implementation of the National Fintech Strategy in practice. Enhancing public-private dialogue (PPD) between regulators and industry participants can enhance mutual understanding of Fintech innovation and risk profiles, their role in financial inclusion, and can help to strengthen compliance with international standards. We can learn and benefit from one another. In this context, dialogue plays a major role, and events like this can help us enhancing the dialog with one another.
It can be argued that index funds distort the price of the targeted indices and that, as a result, the indices end up creating rather than measuring performance. ·  Last but not least, the impact of risk management techniques on market dynamics is particularly enlightening with regard to the question of asset price overshooting. Value-at-risk calculations have become a crucial element of the standard approach used by market participants to evaluate the risk inherent in their market activities and to set up exposure limits. Of course, central banks and financial institutions should continue to encourage the use of these instruments. But, in times of financial turmoil, the growing use of sophisticated risk management techniques by financial intermediaries might have had the paradoxical effect of amplifying the initial shock, exhausting liquidity and contributing to contagion  3  M. BORDO, B. EICHENGREEN, D. KLINGEBIEL and M. S. MARTINEZ-PERIA: “Is the Crisis Problem Growing More Severe?”, CEPR, September 2000. 4  BIS Review 28/2001  phenomena. Regardless of the intrinsic qualities of these risk management tools, we see that their growing use in the same fashion by all market participants may have produced pernicious effects. When market players rely on converging risk evaluations, they tend to take the same decisions at the same time, thus amplifying the initial shock to prices and trading volumes. All those factors have one consequence in common: they encourage homogenous behaviour and reactions to the detriment of the diversity that is indispensable to the smooth functioning of financial markets.

In current, unstable circumstances, what role should the central bank play? Monetary policy should certainly stick to its mandate and ensure price stability in the medium run. In Europe, with financial conditions tighter as a result of the explosion in sovereign spreads, increased uncertainty and loss of confidence, – as shown by the fall in most indicators – there are now more downside risks to price stability. It was therefore appropriate to lower our policy rates by 25bp, a decision reached unanimously by the Governing Council. Second, we need to ensure that the banking system has access to liquidity –what is sometimes called the role of lender of last resort of the central bank. In this respect, the  BIS central bankers’ speeches  3  Eurosystem has confirmed its policy of providing unlimited liquidity – at fixed rates – to the banking system until at least until the end of Q2 2012. Collateral policy has been adjusted to avoid the shocks and liquidity squeezes borne out of rating changes. Dollar funding, based on the existing swap with the Federal Reserve, has also been made easier. Finally, in a period of intense market disruption, it is essential to ensure that the monetary policy transmission mechanism actually works. This may involve temporary and exceptional interventions on those market segments where dysfunctions are most apparent. This is the purpose of the Securities Markets Program (SMP), initiated in May 2010 by the Eurosystem.
Terms of trade are projected to improve significantly this year, contributing to a larger current account surplus than would otherwise occur, but the improvement will reverse to an extent in 2017 and 2018. The sizeable current account surplus of the past few years will therefore shrink significantly during the forecast horizon and will have nearly disappeared by 2018. Rapid growth in domestic demand under conditions of full utilisation of resources has often proven dangerous to Icelanders. Other things being equal, such a situation calls for monetary and fiscal tightening. Our initial position is unusually good this time, as can be seen in a strong current account surplus, a central government surplus and declining government debt, and inflation that is still below the target. But the tug-of-war between large pay increases and the  BIS central bankers’ speeches  1  global tendency towards deflation will determine how much and how rapidly this situation deteriorates in the coming term. In my speech at the Central Bank’s Annual General Meeting, I expressed considerable concern about the unrest in the labour market and the consequences that it could have for economic stability. In the speech, I noted that wage pressures that jeopardise the inflation target are generally considered a sign of both demand pressures in the economy and excess demand in the labour market, which must be met with tighter monetary policy. However, this was not consistent with a slack that was just about to disappear and a sizeable current account surplus.

To cope with these challenges, Carmen’s ability to take a step back and to provide us with a clear view of the big picture is most welcome. With this, I conclude my remarks, and I look forward to a stimulating talk and discussion. Carmen, the floor is yours. Page 4/4
Mr. Clementi explains how London’s banks and markets will help to forge links between the euro area and the rest of the world Speech by the Deputy Governor of the Bank of England, Mr. David Clementi, before international bankers and members of international organisations in New York on 10/2/98. Despite all the uncertainties of the last few years, I think that it is now well understood that the euro is going to be introduced on 1 January 1999. As you all know, the United Kingdom is not going to adopt the euro as its domestic currency from the start. But the euro is likely to become the core currency for the European wholesale markets in London. The City of London is Europe’s leading financial centre; and the introduction of a major new currency on the Continent of Europe means that London must have all the necessary trading, payment and settlement infrastructure, and be fully part of the conversion. London will be ready for the euro. What I want to do today is to explain - with my colleague, John Townend, and Sir David Walker, head of Morgan Stanley in Europe - how London’s banks and markets will help to forge links between the euro area and the rest of the world. And we also want to discuss the broader question of how the euro will affect the European financial landscape. We hope that EMU will be a success. The British Government is in favour of joining EMU in principle.

Research, including the PRA’s own analysis of survey responses from UK firms, suggests that the fixed costs of implementing new requirements can be proportionally higher for small firms than for large ones when measured as a fraction of a firm’s assets.7 What this tells us is that there are economies of scale when it comes to compliance costs and that some costs fall relatively heavier on small firms than on large firms. At the same time, separate research by Bank staff shows that prudential requirements that are well-matched with the risks that cause large banks to fail are not so well-matched with those that cause small banks to fail.8 Putting this evidence together, we can ask whether there are requirements which are relatively more costly for small firms to implement but which deliver fewer benefits than when they are applied to large firms. And that is what we do in this Discussion Paper. Having identified requirements which do not make a material  6  Amadxarif et al.
Table 4: Conditional gender pay gap for specification (5) and (8)  Specifications (5)  Female  (8)  Coefficient  Pay gap, per cent  Coefficient  Pay gap, per cent  Number of observations per group  -0.159***  -15%  -0.163***  -15%  291,859  -10%  38,793  (-11.17)  -0.102***  Ethnic minority  (-23.01) 0.0719***  Female*Ethnic minority Observations  (-11.30)  7%  (-13.57) 537,177  524,612  Source: ONS Labour Force Survey and Bank of England calculations. Note: Coefficients are recalculated into percentages as per Palmquist (1980) due to log-linear specification. In order to calculate the pay gap for female ethnic minorities, we have added up the coefficients of the female, ethnic minority, and the female-ethnic minority interaction dummies, as all of these dummies take the value 1 for a female ethnic minority. If we run these regressions over time, the same broad pattern emerges. White men earn more than any of the other three categories (ethnic minority males and females and white females), although all of these pay gaps have shrunk somewhat over the past 25 years (Chart 24). Pay gaps for ethnic minority males have tended to be a little smaller, but have also fallen less rapidly. Pay gaps for ethnic minority women, while halving over the period, remain strikingly high.

This means the median observation for the white group occurs a lot earlier than for the ethnic minority group. As a result, when we run a pooled Oaxaca-Blinder decomposition, more weight is placed on later observations, where the ethnic minority population is larger leading to a negative ethnicity pay gap. This is at odds with time-series results which take into account the relative shares of the two groups in each year. To ensure that the results are comparable with the gender pay gap, we aggregated the results from the time series regressions using the share of the two groups in each year as weights. 24  All speeches are available online at www.bankofengland.co.uk/speeches  24  ethnic minority workers tend to be employed in regions where wages are higher (40% of ethnic minorities work in London) and tend to have higher qualifications than their white counterparts. Once these compositional effects are accounted for, the unexplained (“pay bias”) ethnicity pay gap is as large as for females. It averages just under 10 percentage points over the sample. This demonstrates one of the perils of interpreting raw, unconditional, pay gap data too literally. Replicating this analysis for people born in the UK reduces by half the size of the pay bias. Conversely, for people born outside the UK from ethnic minority backgrounds we estimate a significantly larger pay bias, at around 12 percentage points.
And there is more the Bank can do to widen and deepen its educational offering in schools. On each of those fronts, however, the Bank has over the course of the past ten years established robust foundations on which to build. 40  Haldane (2018b). 21  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  21  When it comes to one particular aspect of transparency - forward guidance - I think a more fundamental rethink may be needed, however. Forward guidance was introduced by central banks after the Global Financial Crisis. In principle, it offered real promise. Offering a soft pre-commitment to a given policy path could bring forward some of the effects of future policy, giving it extra bang for its buck.41  In practice, these benefits are only achievable if the policy guidance issued is hard enough to offer some credible pre-commitment, at the same time as being soft enough not to lock central banks in too tightly should circumstances change. This is a classic Three Bears problem: how to choose a form of words that is neither too hard, nor too soft, but just right. Getting guidance just right is a problem central banks, a decade on, have not solved satisfactorily. In my view, with few exceptions forward guidance has ended up either being too vague and ambiguous to offer an effective source of assurance to the outside world, or a source of regret among central banks who have over-committed to something ex-post undesirable.

That day is etched on my memory. I had the incredible good fortune to be sitting on the Bank’s foreign exchange dealing desk that day, watching agog as we lost around £ billion in foreign exchange reserves defending the pound – at the time, real money – despite announcing interest rate rises of 5 percentage points in a single day. How the world has changed. Currently, financial markets expect UK interest rates to rise by an average 5 basis points each six months for the next 10 years. The UK’s exit from the ERM led to a new nominal anchor being needed. And almost immediately, one was adopted – an inflation target. It had one obvious merit: it was the only monetary framework not to have already been tried in the UK. But the track record of inflation-targeting was close to non-existent. At the point the new target was announced, expectations for UK inflation were high (over 5%) and expectations for the framework lasting were low. The collapse in sterling following sterling’s ERM exit, and the expected sharp rise in inflation, meant the wheelie bin beckoned for inflation-targeting. In the event, inflation failed to pick up as much as expected after the ERM debacle. And, behind the scenes at the Bank, the machinery of monetary policy was changing. Data, analysis and models suddenly became more central to judgements on inflation and the appropriate monetary stance. Accompanying this, economics and economists began playing a more central role in formulating the Bank’s judgements.