samchain/econo-pairs-v1 huggingface dataset:
It thus applies regardless of whether or not long-term interest rates are affected by depressed forward premiums (for instance, as a result of the Federal Reserve’s purchases of government securities). It also applies regardless of whether market expectations are good and reliable forecasters of future interest rates. The assumptions we make about long-term Swedish and foreign interest rates are thus important. This was one possible explanation why the main scenario contains such a modest krona appreciation. The other possible explanation and corresponding interpretation of the main scenario can be described as follows. In Figure 7 the red and yellow curves show the Riksbank’s forecasts for the repo rate and the TCW-weighted policy rates abroad, respectively. At the same time, the blue and grey curves show market expectations of the repo rate and the TCW-weighted policy rates abroad, respectively. If the current repo rate and the actual policy rates abroad develop over time according to the red and grey curves, the market will be surprised if the repo rate and foreign policy rates are raised more quickly  8  BIS Review 158/2010  than expected. The market will then gradually raise its expectations of future interest rates. That is, over time the blue and grey curves will show an upward shift. This means that the corresponding blue and grey yield curves in Figure 8 will shift upwards over time.

The decision-making process can then continue with forecasts for inflation and resource utilisation conditional on alternative repo rate paths, to determine which repo rate path is judged to best stabilise inflation and resource utilisation. These forecasts can be made under two different assumptions. One assumption is that the alternative repo rate path will become credible and be incorporated into market expectations. Forecasts under this assumption can be constructed by using what are known as anticipated deviations of the repo rate path  BIS Review 158/2010  11  (Laséen and Svensson 2010 and Svensson 2010b). The other assumption is that the alternative repo rate path is not credible, that market participants are surprised when the actual repo rate deviates from the expected one. Forecasts under this assumption can be constructed by using what are known as unanticipated deviations of the repo rate path. The assumption used should depend on the circumstances and the motives for this choice should be stated. Normally, the repo rate path that is included in the main scenario of the report should be chosen such that it best stabilises inflation and resource utilisation when it is credible. The starting point should be that the analysis in the Monetary Policy Report/Update and in other information from the Riksbank is so complete, well-reasoned and convincing that it gives the repo rate path credibility. Forecasts for policy rates abroad should primarily be based on market expectations according to implied forward rates.
‘Resolution’ does not mean ‘resurrection’ of a fallen bank. Rather, it means stabilising the bank so that, over time as far as is necessary, it can be either split up, restructured or parts of it put into insolvency in an orderly way. These new responsibilities and powers, crucially, do not only cover what happens when a bank can no longer carry on operating; they also cover how a bank organises and finances itself when it is operating normally. A key lesson of the crisis is that the structure and financing of a bank when it is operating normally can make it impossible to deal with its failure in an orderly way. If banks are not structured and financed in a way that supports orderly resolution before they run into trouble, the authorities’ options can be very constrained when the bank fails. (iii) Bank structures This brings me to the third plank of ending too big to fail. Banks before the crisis were not organised to be resolvable. The third plank is to ensure that banks are structured in a way that supports resolution and that barriers to resolvability are removed. This can be a daunting challenge – the average number of separate legal entities at G-SIBs is around 1,000 and in some cases is much higher.9 This may seem a rather gruesome business. It is not usual for a firm to spend a huge amount of time planning for its demise. It is certainly an onerous business for all concerned.

As a result, when Northern Rock got into trouble and a buyer could not be found, the Government had no alternative but to nationalise it – shareholders were wiped out and subsequently the Government was forced to inject £ billion of capital into the bank. A year later, when faced with the much bigger challenges of RBS and HBOS, the Government likewise had to step in.8 The situation was similar in other countries. While the US had a resolution regime, this only covered the insured deposit-taking entities within a banking group and proved unable to deal with the failure of large, interconnected groups. Similarly, SEC-regulated investment banks were outside of the scope of resolution regimes. While some European countries had bank-  8  4  Existing shareholders were not fully diluted in either RBS or HBOS. In the case of RBS, for example, they retained 16% of RBS’s total share capital (30% of voting shares). BIS central bankers’ speeches  specific insolvency regimes, they too did not have regimes that satisfy modern standards for bank resolution that would have guaranteed the continuity of critical economic functions. The shortcomings in terms of public institutions and powers have now been addressed in the key jurisdictions. We have, of course, yet to see how the new resolution powers operate in practice. But we now have a crucial, far reaching capability that we lacked entirely eight years ago. We need to be clear at this point what we mean by ‘resolution’ powers and authorities.
Although developments in bank credit continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets, the monetary policy measures in place since June 2014 are increasingly filtering through to support borrowing conditions for firms and households and thereby credit flows across the euro area. To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to preserve the very substantial amount of monetary support that is necessary in order to secure a return of inflation rates towards levels that are below, but close to, 2% without undue delay. Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. As emphasised repeatedly by the Governing Council, and as strongly echoed in both European and international policy discussions, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries. The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation.

Looking ahead, on the basis of current oil futures prices, inflation rates are likely to remain low over the next few months before starting to pick up towards the end of 2016, in large part owing to base effects in the annual rate of change of energy prices. Supported by our monetary policy measures and the expected economic recovery, inflation rates should increase further in 2017 and 2018. This pattern is also reflected in the September 2016 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.2% in 2016, 1.2% in 2017 and 1.6% in 2018. In comparison with the June 2016 Eurosystem staff macroeconomic projections, the outlook for HICP inflation is broadly unchanged. Turning to the monetary analysis, broad money (M3) continued to increase at a robust pace in July 2016, with its annual rate of growth standing at 4.8%, after 5.0% in June. As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 8.4% in July, after 8.7% in June. Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations increased to 1.9% in July 2016, compared with 1.7% in June. The annual growth rate of loans to households remained stable at 1.8% in July.
It provides a new framework for the Bank’s implementation of monetary policy; our operational engagement with the banking system; and for the sterling money markets. I shall spare you the details, but I do want to sketch the main features of the system, by way of underlining that it is directly relevant to you as corporate treasurers. I am keen that you should hear this directly from the Bank. For as long as anyone can remember, a small group of clearing banks – which these days we call ‘settlement banks’ – have had to balance their books with the Bank at the close of business each evening. Volatility resulted if the Bank had not provided pretty well exactly the amount of liquidity the banking system as a whole needed each day; or if our money was not distributed in the money markets to those banks that were short. And traders would speculate on that volatility – perhaps a rare instance of financial market activity with little social utility. The new system relaxes the overnight constraint and liberalises access to the Bank. A broader group of banks – initially just over 40, accounting for around 90% of the UK banking system’s sterling liabilities – will maintain a target balance with the Bank on average over each month. (In the first maintenance period, which started yesterday, the target is just under £ These reserve-scheme banks, and other banks who so choose, also have access to a standing deposit facility and a standing (secured) lending facility.

That was resolved progressively during the 1990s, culminating in the Government’s announcement in 1997 that an operationally independent Bank of England was charged with achieving a clear inflation target. A stable monetary environment has reduced the quite unnecessary risk of self-induced ‘boom and bust’ flipping about demand conditions across the economy as whole. For users of financial markets, the most visible sign of the change was the reduction in yields on conventional government bonds with long maturities, which had previously compensated for high and highly uncertain prospective inflation rates. By ushering in a world with a credible nominal anchor, one source of uncertainty and risk was significantly reduced. The ex post annualised volatility of ten year gilt yields has halved: from over 200 basis points between 1970 and 1997, to under 100 basis points since the current monetary regime was introduced (Table 1). That means that, as corporate treasurers, one source of unavoidable uncertainty about your long-run borrowing costs has been very significantly reduced. The introduction of the new monetary regime did not, and of course could not, remove uncertainty about the quarter-to-quarter, or indeed year-to-year, path of the economy and inflation. And so there remains a degree of unavoidable uncertainty about the short-term path of official rates, as the Monetary Policy Committee responds to cyclical developments. Transparency can reduce that uncertainty, through our making clear what we think is going on in the economy and how, generally, we react to changes in the outlook.
Notes: A dataset of around 600 paragraphs from each of the following sources was used. Banks – a mixture of terms and conditions and various reports from Barclays, RBS, HSBC and Lloyds. BoE – a mixture of Bank of England speeches, reports and news content. AH – a selection of my recent speeches. Political speeches – the Leaders’ speeches from Conservative, Labour and Liberal Democrat party conferences in 2012 and 2014. One Tabloid and one Broadsheet newspaper were also included. These measures consider not only sentence length but also the number of polysyllables (words of three syllables or more) and the average number of syllables per word. In general a lower number signifies lower complexity, apart from the Flesch-Kincaid reading grade level and Coleman correct completion measures where a higher number implies lower complexity. For further details please see DuBay (2004). 18  BIS central bankers’ speeches  Chart 4 Average sentence and word length across publications Sentence length / words  26  Banks  24 22  BoE  Broadsheet  20 Tabloid 18 AH 16 14  Political speeches 4.2  4.4  4.6  4.8 Word length / letters  5  5.2  5.4  Source: Bank calculations. Notes: A dataset of around 600 paragraphs from each of the following sources was used. Banks – a mixture of terms and conditions and various reports from Barclays, RBS, HSBC and Lloyds. BoE – a mixture of Bank of England speeches, reports and news content. AH – a selection of my recent speeches.

A lack of reliable information resulted in excess risk-taking by many, perhaps unknowingly. Investors and banks believed they could pass on losses to others or expected the authorities to intervene in the event of failure. It is now widely recognised that the regulatory framework for financial markets was too weak. Increased ambitions with regard to regulating financial markets and new and better instruments are on the agenda. I will revert to this later. But let me start with the external environment. The world economy: Keeping one’s house in order provides robustness The global economic crisis in autumn 2008 was the biggest economic earthquake in our time. The following year, world GDP fell for the first time in generations. The crisis was triggered by an abrupt decline in the US housing market, but a tightly interwoven financial sector caused the problems to spread rapidly across countries and sectors. When the bubble burst, excessive optimism in the financial sector turned to deep pessimism. The flow of credit dried up. It became expensive and difficult for financial institutions to procure funding even though the problems had originated in asset value losses in a faraway region. Cross-border trade, which is dependent on well functioning credit channels, was adversely affected. Even an expansionary economic policy, with record-low interest rates, low tax receipts and strong growth in public demand for goods and services, could not prevent the downturn from deepening in many countries. However, it did help reduce its duration compared with the depression in the 1930s. Chart 1: Current account.
As both a user and a partner, we can affirm that the quality of the Office’s statistical output has increased immensely over the transformation period. Examples include the publication of national accounts according to international standards and the compilation of data on the government debt and deficit. The Czech National Bank focuses mainly on monetary and banking statistics and balance of payments statistics. The harmonisation of the monetary statistics with European standards was recently completed in both main components balance sheet statistics and interest rate statistics. Monetary and credit aggregates and interest rates are now methodologically comparable with the data of other EU Member States. Speaking of harmonisation, I must mention the calculation of another convergence criterion - long-term interest rates. This calculation is based on long-term government bond yields on the secondary market. The Czech National Bank thus provides the statistical foundation for assessing this criterion. International standards such as the IMF’s 5th Balance of Payments Manual are also observed when compiling the balance of payments. The balance of payments is now published every month and the required items are also broken down geographically. In recent years, much attention has been devoted to the category of foreign direct investment, where the data are published in very detailed geographical and sectoral breakdowns. The balance of payments is perhaps the best example of co-operation between the Czech Statistical Office and the Czech National Bank.

Bank of England  Page 5  One of the most striking global trends over the past half century has been an overall decline in the level of risk-free interest rates – risk-free in the sense that they are returns on lending that carries a negligible risk that payment obligations will not be met by the borrower. Chart 1 shows how, when we look at this over a longer period of time, ten-year UK nominal rates have fallen compared to where they were in the 1980s. Both the very low levels of interest rates we have seen in the years leading up to the Covid pandemic, and their recent rise from those levels, must be seen against the backdrop of that downward trend. Chart 1: The UK ten-year nominal rate has fallen over recent decades Ten-year zero coupon yield (spot interest rate) from UK gilts (a) Per cent 15  15  10  10  5  5  0  0  -5 1985  -5 1990  1995  2000  2005  2010  2015  2020  (a) Sources: Bloomberg Finance L.P, Tradeweb and Bank calculations. A good part of this decline can be explained by lower inflation itself. It reflects the success of inflation targeting in delivering low and stable inflation over long periods of time. Under inflation targeting, monetary policy makers act decisively to return inflation to target whenever shocks cause prices to rise or fall by too much.
In economic literature, capital outflows following the developments of this kind are called “sudden stops”. Turkey and many other developing countries have occasionally experienced such sudden stops. Keeping excessive volatility and international capital flows under control is crucial for financial stability. In this respect, macroprudential measures stand out as an important tool. The monetary, fiscal and financial sector policies adopted by advanced economies in the wake of the global economic crisis exposed even open developing countries with sound economic fundamentals to financial instability risk. The Central Bank of the Republic of Turkey, in view of this risk, safeguarded both price stability and financial stability simultaneously by adopting a flexible monetary policy, and thus contributed to the sustainable development path. In addition to the flexible monetary policy strategy implemented by the Central Bank as of the end of 2010, the prudent measures adopted by the BRSA accompanied by the safeguarded fiscal discipline strengthened the Central Bank’s hand. We firmly believe that we will attain very positive results with respect to price stability and financial stability by the end of 2012. Along with national macroprudential measures introduced by countries, some international criteria have also been developed for the sake of safeguarding financial stability. For example, the Basel III accords bring about new arrangements reinforcing the capital structures of financial institutions. These arrangements will ensure a more resilient financial sector against unforeseen risks and will contribute to financial stability. The recent efforts clearly point to a consensus among countries on the critical importance of safeguarding financial stability.

But since 1995, the gap has started to widen again as ICT investment has boosted productivity growth in the United States. The empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. Within manufacturing, the rate at which the productivity gap between Britain and the US closed during the 1980s and early 1990s was greater in the more open than the less open sectors. Against that background, let me suggest three areas for questions: First, why is the gap in the level of productivity between the US and the UK so persistent? And what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? What are the respective roles of business and government in removing them? Second, can the UK benefit as much as the US from the IT revolution? Is it a question of the speed with which business adapts? Or is it the need to fund our research-based universities on the scale of the best elsewhere in order to exploit our comparative advantage in the English language and regain Britain’s place at the frontiers of knowledge? Or is it a matter of raising standards of education in schools to enable the workforce as a whole to use the new technology?
Christian Noyer: Does money matter? A European perspective Speech by Mr Christian Noyer, Governor of the Bank of France, at the 4th ECB Central Banking Conference “The role of money: money and monetary policy in the twenty-first century”, Frankfurt am Main, 9 November 2006. *  *  *  It is a great pleasure and honour for me to take part in this Central Banking Conference. My communication will be organised as follows: I will first review some stylized facts about money and inflation that show that money still matters; second, I will relate these stylised facts to the two-pillar monetary policy strategy of the Eurosystem. I will conclude my presentation by addressing some interesting challenges we face in implementing our monetary analysis. Some stylized facts about money and inflation Let me start with a well known paradox which can be articulated in three propositions: first, price stability is the objective of all Central Banks; second, as Milton Friedman put it "inflation is always and everywhere a monetary phenomenon"; and third, nevertheless, in most countries, money has little or no part in the design or implementation of monetary policy. There is, of course, one noticeable exception: the euro area. Before getting into more details about our approach, I would like to mention two reasons why I think money, as such, remains an essential component for the design and implementation of monetary policy. •  First, money is still of direct relevance to monetary policy in exceptional circumstances: either strong (or hyper) inflation or deflation.

This is precisely the aim of this conference. I thank you for your attention. BIS Review 108/2006  3