samchain/econo-pairs-v1 huggingface dataset:
These data are collected by the U.S. Bureau of Labor Statistics as part of its monthly Current Population Survey. 2  Aaronson and Sullivan (2001). 2  BIS central bankers’ speeches  since then. 3 Among the many robustness analyses they performed, their models produce nearly the same trend for labor force participation as they have since 2001. 4 Depending on the details of the specification, Chicago Fed economists estimate that at the end of the second quarter of 2014, the labor force participation rate was between 1/2 and 1–1/4 percentage points below trend. Furthermore, the participation rate was as much as 3/4 of a percentage point below predictions based on its historical relationship with the unemployment rate. This disparity suggests that there likely is an extra margin of slack in labor markets beyond that indicated by the unemployment rate alone. It is interesting to dig further into these “labor force participation gaps.” Virtually all the gap during this cycle has been due to withdrawal from the labor market of workers without a college degree. By contrast, a participation gap never materialized for college graduates, even during the depths of the recession. There is no simple explanation for this striking contrast. It could be yet another symptom of long-running but difficult-to-model trends in the economy, such as job polarization and changes in social programs, which particularly impact the lower-skill work force. 5 Regardless, the divergent work behavior across education groups strikes me as an important fact and deserving of much further research attention.

Since then, we have made significant progress in moving the unemployment rate back to a more normal number. Yet, at 6.1 percent, it remains too high. And, as we have heard all morning, other measures of labor market activity remain suppressed. We have underperformed on the inflation front as well. Since 2008, year-over-year total inflation as measured by the Personal Consumption Expenditures Price Index (PCE) has averaged just 1.4 percent, well below its 2 percent target. Today, PCE inflation stands at 1–1/2 percent and is expected to move up only slowly toward the FOMC’s target. Nonetheless, we have come a long way in healing the injuries the financial crisis inflicted. Certainly monetary policy has been doing some heavy lifting. The Federal Reserve responded quickly to the unfolding recession by cutting the fed funds rate to near zero by December 2008. At the zero lower bound (ZLB), we then turned to unconventional measures, such as large-scale asset purchases and forward guidance about the federal funds rate to provide further accommodation. In the fall of 2012, with the unemployment rate hovering stubbornly at around 8 percent and core inflation steadily drifting lower than our 2 percent target, the Fed introduced open-ended asset purchases and, later, forward guidance that related federal funds rate actions to thresholds explicitly expressed in terms of our policy goals. Together, these efforts have helped the economy make impressive progress toward our employment mandate and appear to be moving us closer to our 2 percent inflation target as well.
Importantly, some members of our constituency have been able to utilize the fiscal space arising from past reforms, which is a contributing factor behind the stronger demand in these countries. Nonetheless, the concurrent challenge is to keep inflationary pressures under control while ensuring that strong domestic demand does not lead to a build-up of imbalances. 4. Notwithstanding the baseline scenario, it is clear to us that the Fund is correct in identifying the financial turmoil as the single greatest risk to growth. In the US, given the loss of confidence, the immediate priority for the authorities was to limit the financial contagion and counter the downside risks to growth. Following that, the first line of defense was monetary policy and monetary operations to inject liquidity. The second line was fiscal stimulus. We view these actions as steps in the right direction, although one should also recognize the limitations of such policies at a time of impaired balance sheets and ebbing sentiments. The third line of defense was using public money to safeguard the stability of the financial system. In view of the systemic nature of the crisis and the potential for spillovers we appreciate the need for decisive policy actions and the drastic unorthodox measures. BIS Review 51/2008  1  Indeed, our own experience during the Asian crisis was that adherence to a market-centric philosophy in an environment where markets have seized up is simply not tenable.

xxi  Chart 11: The UK bond-equity correlation has turned negative for the first time ever Correlation 0.8  0.6  0.4  0.2  0.0  -0.2  -0.4 1759  1809  1859  1909  1959  2009  Source: Thomas and Dimsdale (ibid.) and Bank calculations. Line shows ten-year trailing correlation of monthly returns on UK equities and consols. See also Roberts-Sklar, M. (2016), “250 years of the bond-equity correlation”, Bank Underground, 20th October. This unprecedented desire for safety has helped to drive down the equilibrium interest rate – the interest rate central banks must deliver in order to balance demand with supply and so achieve stable inflation. In this sense, low policy interest rates are not the caprice of central bankers, but rather the consequence of powerful global forces, including debt, demographics and distribution. xxii  9  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  9  Those same forces are contributing to deficits in defined-benefit pensions. The value of these schemes’ investments in equities and real estate are low relative to the level of interest rates because investors are valuing safety much more than they are expecting faster growth. Said differently, since pensions are future claims on the economy, there isn’t a parallel universe of higher interest rates, higher growth and equity prices, and lower pension deficits. That is, there isn’t without real structural reform. Blaming monetary policy avoids these hard truths.
However, recent empirical estimates for the UK suggest the effect is qualitatively present with the increase in banks’ overall funding costs due to higher capital requirements lower than in the absence of the theorem by 45% (Miles et al 2013) and 53% (Brooke et al 2015). 11 For example, the now defunct authority regulating the US Government-sponsored mortgage agencies stress tested them to only an 11% fall in house prices – a more severe shock than any nationwide house price decline to be found from 1945 onward. The peak-totrough fall of 11% was calibrated based on house price data for the West South Central Census Region between 1984 and 1993. Frame et al (2015) show that an alternative scenario based on realised post-2006 data would have revealed that Fannie and Freddie’s capitalisation was much weaker than what the original stress tests suggested. It wasn’t only regulators who made the mistake of relying on the recent past only. During a week when Goldman Sach’s Global Equity Opportunities fund lost 30%, Goldman’s chief financial officer famously stated: “We were seeing things that were 25-standard deviation moves, several days in a row.” His focus was too narrow. While the moves in 2007 were substantial, they were not unprecedented. Even within the last thirty years, equity prices had experienced larger single day falls than they did during 2007. 12 Danielsson et al (2016) show that systemic risk indicators constructed with market data were low and falling before the stress events in 1997 and 2008, and shot up during the events.

José De Gregorio: IMF challenges and policies for the global economy Statement by Mr José De Gregorio, Governor of the Central Bank of Chile, speaking on behalf of the Southern Cone Countries of Latin America International Monetary and Financial Committee Meeting, Washington DC, 24 September 2011. *  *  *  In the past few months, the near-term prospects for the global economy have worsened significantly and financial risks have increased. What some time ago was a modest, albeit unbalanced recovery, risks turning into a new economic downturn, particularly in major Advanced Economies (AEs). This new scenario poses urgent challenges to the IMF and to the membership in terms of decisive political and policy responses to solve fundamental weaknesses and mitigate the negative impact of this new downturn. Against this backdrop, the Fund’s surveillance capacities, and a well-functioning International Monetary System (IMS), are being and will again be put to the test only a couple of years after the 2008–2009 Great Recession and financial crisis. I. The immediate challenges ahead and the fund’s policy advice  Two forces are influencing each other and weighing down on economic prospects in major advanced economies. On the one hand, uncertainty and volatility have increased to their highest levels since October 2008, constraining credit and leading to more cautious behavior by households and financial institutions.
There are many aspects of the reform package that the PRA is taking forward this year through its own consultations. This package includes some new supervisory measures to help the PRA maintain safety and soundness and policyholder protection. These new measures provide additional tools and clearly complement our existing set of supervisory powers. As a reminder, the measures set out by HMT are:  Page 7  to require insurers to participate in regular stress testing exercises prescribed by the PRA and to allow us to publish individual firm results; to require nominated senior managers with formal regulatory responsibilities and sanctions under the Senior Managers Regime to attest formally to the PRA whether or not the level of the fundamental spreads (FS) on their firm’s assets is sufficient to reflect all retained risks, and that the resulting MA reflects only liquidity premium, on the basis of a rigorous assessment of the characteristics and valuations of assets held in their matching adjustment portfolios, including the results of the stress testing exercises described above; to allow insurers to apply a higher FS where they conclude that the standard allowance is insufficient taking into account the work undertaken to support the attestations set out above; and to update the MA rules as appropriate to reflect the Government’s decision to widen the eligibility requirements to include assets with highly predictable cashflows. We are approaching the development of these supervisory measures with input from subject expert groups with a membership drawn from industry and the PRA.

Moreover, the ultimate aim of the policy is to get the annual rate of growth of nominal spending in the economy back to the 5% or so that it averaged during the first decade of the Monetary Policy Committee’s existence and which is consistent with inflation at target and growth at trend. In contrast, over the past year, nominal spending has fallen by roughly 5% (Chart 8). The £ billion of asset purchases has been calibrated with this in mind, though it will be some while yet before we know how effective the policy has been in achieving the objective. Indeed, the truth is that we will probably never know exactly how effective the policy of Quantitative Easing has been, for the simple reason that we can never know with precision what would have happened in its absence. My only confident prediction is that academic economists and their PhD students will be poring over the topic for decades to come. To conclude, I want to return to some accounting issues. As I noted earlier, the Asset Purchase Facility is set up as a separate entity, indemnified by the Treasury. The Bank is committed to transparency about its operations, and we will be publishing annual accounts for the Asset Purchase Facility, drawn up in accordance with established international accounting principles. The Asset Purchase Facility receives coupon payments from the government on the gilts it holds, as well as some income from its small holding of corporate assets.
Lars Nyberg: The securities market today and tomorrow Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a conference organised by Dataföreningen, Stockholm, 10 November 2004. * * * First, thank you for inviting me to speak at this conference about the Swedish securities market today and tomorrow. Securities markets are of course a significant part of a modern economy and fulfil several important functions, which include mediating information, supplying capital and acting as a channel for risk management. They also undergo an almost continuous process of change, which offers new challenges to operators in the financial sector as well as to public authorities. It is therefore particularly exciting - and important - to be able to discuss these developments here today. Developments in the securities markets in recent years have been dramatic in many respects. For instance, we have experienced an intensive stock market upturn, followed by one of the largest crashes in modern times. IT shares went from being unbeatable profit-makers according to tabloid headlines to being worth only a fraction of what was promised. However, I am not here to discuss earnings, although the bubble phenomenon is an interesting subject in itself. Today I intend to concentrate mainly on structural change processes. We have relatively recently witnessed some tendencies to increased integration in trading in financial instruments.

At retirement age, net saving becomes negative once again. When the percentage of people in the respective age groups changes, it affects savings at a national level. Seen from a longer perspective, the most spectacular demographic trend is that we are living longer. In 1950, 10 per cent of the population was aged 65 and over. Today the figure has risen to 17 per cent, and in 2035 it will be 23 per cent, according to Statistics Sweden’s forecasts. Savings at a national level need to be adapted to be able to support this growing band of long-lived, active pensioners. The collective social insurance systems are currently undergoing development, which emphasises the need for additional private saving. There is uncertainty over what expectations and needs the welfare state should and can fulfil, but most people appear to agree that the role of the welfare state must decline as a declining workforce has to support a greater number outside of it. The original delegation of savings from the individual to society will revert to the individual in different ways. For instance, individual choices have been introduced within the framework of the pension system, giving the individual some responsibility for management of the savings. This applies to both occupational pensions and the state pension system. These changes stimulate savings and also channel some of the earlier collective savings into savings markets, particularly mutual funds and pension funds. The fact that we have had a large inflow of capital into the securities markets is therefore fairly unsurprising.
I have six proposals: 1- First, we need to encourage players to take risks, but only the “good” risks; in other words we need to restore and repair the mechanisms for supplying credit to the economy, and use the full range of tools at our disposal to achieve this. We must stop trying to draw a line between banking and market activities; we need both, because they complement each other. If banks stop all trading activities, liquidity could evaporate from the debt markets. Similarly, Europe needs to create a healthy securitisation market which eliminates the errors of the past. This is the best way to separate lending from sovereign and bank risks, and revive cross-border transactions within the euro area, putting an end to the fragmentation of the financial and monetary markets. 2- Second, we need to eliminate the uncertainty created by public policies, which is a major obstacle to long-term investment. We are currently in a phase of transition following the crisis, but are also experiencing an even deeper transformation in our structures of production, notably in energy. It is vital that public policies are clear, stable, free of contingencies, and unequivocally long-term in perspective. 3- Third, we need to restore our fiscal credibility; this is the only thing that will enable us to withstand future shocks. Major progress has been made over the last few years. It would be a shame to undermine that now. 4- Fourth, we need to recreate what Keynes called “opportunities to invest”.

Too often, markets are constrained by obstacles, regulations and bans which act as a disincentive for investment. If we are going to apply a Keynesian economic model, then we need to apply it to the full, and avoid distorting his thinking. Structural reform doesn’t have to be painful; on the contrary, it often creates a brighter future, and opens up opportunities to those who have none. 5- Fifth, we need to incorporate the structural changes in the financial sector into our prudential oversight. We need to adapt to a new environment where asset managers play the dominant role in capital allocation and asset price formation. This means changing the way we think, as well as our methods of analysis and action. In this context, the French model of integrated supervision is particularly apt. 6- Lastly, number six, we need to refocus financial innovation on the long-term. Today, literally billions of dollars are spent finding ways to shave a few nanoseconds off arbitrage transactions between two trading platforms. At the same time, investors struggle to find secure long-term financing tools for public infrastructure, even though experience has shown that the private (and social) returns of this type of investment are much higher. “Infrastructure bonds” have been shown to offer return/risk ratios that are often higher than those on traditional assets. The G20 has rightly made this issue a priority and is looking for ways to strike a better balance between incentives and initiatives, through regulation and financial engineering. BIS central bankers’ speeches  3
23 Not only will this system likely mean that banks’ binding constraint on reserve levels will be different from before the crisis, but also that bank behavior when reserves decline will likely be different. For example, in comparison to the 14-day maintenance period I mentioned earlier under Regulation D, many of these new constraints are measured quarterly, while some are measured daily for certain purposes. This means that signs of reserve scarcity may emerge differently and on a different timescale than they would have in the old system. Moreover, banks 20  For example, there has been an expansion of access to centrally-cleared repo, through the introduction of the GCF Repo Service’s Centrally Cleared Institutional Triparty Service (CCIT), which opened the centrally-cleared triparty repo market to institutional cash lenders, and the growth of activity in the centrally-cleared bilateral repo market by institutions being sponsored by members of the Fixed Income Clearing Corporation’s (FICC) Government Securities Division. Separately, some foreign banking organizations that had been active borrowers in the offshore Eurodollar market have shifted their borrowing in favor of domestic deposits that are economically similar to Eurodollars. 21 Kroeger, McGowan, and Sarkar (2018) provides detailed background on behavior of the pre-crisis framework. 22 The Regulation D reserve requirement is still binding for many smaller banks.

As we move forward, we will continue to learn about demand for reserves and other Federal Reserve liabilities and market functioning, and may adjust the specifics of the plan as appropriate. What Does All of This Mean for SOFR? That’s a lot on monetary policy, interest rates, reserves, and repos. But before I close, I’d like to emphasize an important point about a particularly important repo benchmark rate, and that’s the Secured Overnight Financing Rate, or SOFR. SOFR is the reference rate that the Alternative Reference Rates Committee (ARRC) has selected as the preferred replacement for LIBOR. At the same time that we saw turmoil in the repo market, we saw a temporary spike in SOFR. As market participants make preparations to transition away from LIBOR, they’re understandably watching SOFR very closely. There are a few things I’d like to highlight with respect to SOFR. First, a temporary spike is not surprising, given that SOFR reflects rates on real-world transactions. Second, the very fact that we saw a spike in SOFR is an indication of how representative of its underlying market it is. It’s based on actual transactions, rather than judgment (like LIBOR), which is part of what makes SOFR so robust. Third and final, is that in the vast majority of use cases, the relevant metric for SOFR is an average over time. Focusing on overnight SOFR isn’t particularly useful in this context, as financial contracts will generally refer to an average of SOFR over many weeks or months.
Prior to the decisions made in March and in the weeks that followed, the Monetary Policy and Financial Stability Committee met frequently, often at short notice. On 12 March, we decided to cut the policy rate by 0.50 percentage point. The countercyclical capital buffer requirement was reduced the day after, helping banks to absorb losses and still have the capacity to provide credit. A week later, we reduced the rate further to 0.25 percent. And at the May monetary policy meeting, we took a step further and reduced the policy rate to zero. The Committee also stated that in its current assessment of the outlook for the economy and the balance of risks, the policy rate would most likely remain at today’s level for some time ahead. With a policy rate close to zero, there is a limit to how much further it can be lowered. Other 2/4  BIS central bankers' speeches  countries have experienced that policy rates can continue to have an impact at slightly below zero, but it is uncertain how negative rates will influence the economy and financial markets, particularly in the current situation. The Committee stated at the monetary policy meeting in May that it is now of particular importance to ensure well-functioning financial markets. The Committee does not envisage making further policy rate cuts. Low interest rates cannot prevent a severe downturn, but can help dampen the decline in activity.

None of us at that time could have foreseen that a virus would change the picture completely and lead the Norwegian and the global economy into a deep decline. Chart: A historically deep decline The economic outlook has changed dramatically in a short period of time. Activity in the Norwegian economy has fallen abruptly owing to the coronavirus pandemic. The virus outbreak and the extensive measures taken to contain it have led to production halts and lower activity across a range of businesses. Unemployment has risen to very high levels. Mainland GDP is projected to fall by around 5 percent in 2020. We have not seen a contraction like this since the war years. Chart: An abrupt and deep decline in the global economy The countries around us have also been severely affected. Measures taken to contain the spread of the virus, combined with changes in behaviour and uncertainty about developments ahead, have resulted in substantial declines in output across economies. In early March, we expected moderate economic growth among trading partners. Now a deep decline appears likely this year followed by a gradual rebound. The subsequent path of developments is, however, highly uncertain. The authorities in many countries have implemented powerful fiscal policy measures to alleviate the situation. Central banks have cut policy rates and taken extensive measures to stabilise financial markets. The sharp global downturn amplifies the challenges for a small open economy like Norway.