samchain/econo-pairs-v1 huggingface dataset:
But this suggests that it might be better for central bankers to examine the efficacy of other instruments in their toolbox, rather than simply ignoring the development of asset bubbles. 3. If existing tools are judged inadequate, then central banks should work on developing additional policy instruments. Let’s take the housing bubble as an example. Housing prices rose far faster than income. As a result, underwriting standards deteriorated. If regulators had forced mortgage originators to tighten up their standards or had forced the originators and securities issuers to keep “skin in the game”, I think the housing bubble might not have been so big. I think that this crisis has demonstrated that the cost of waiting to clean up asset bubbles after they burst can be very high. That suggests we should explore how to respond earlier. Harkening back to my earlier themes, I think we can respond in a number of ways: •  First, we can do a better job understanding interconnectedness. This means changing how we oversee and supervise financial intermediaries. •  Second, we can change the system so that it is more self-dampening. •  Third, we can improve incentives. •  Fourth, we can increase transparency. •  Fifth, we can develop additional policy instruments. For example, we might give a systemic risk regulator the authority to establish overall leverage limits or collateral and collateral haircut requirements across the system.

The high degree of interconnectedness across the financial system has a number of implications. First, supervision must not just be vertical – firm by firm, or region by region, but also horizontal – looking broadly across banks, securities firms, markets and geographies. Second, this means that supervisory practices need to be revamped. They need to be coordinated and multi-disciplinary. I think the U.S. Treasury is right in proposing a systemic risk regulator as part of their regulatory reform plan. But, we shouldn’t kid ourselves about how difficult this will be to execute. You will need a flexible and dynamic governance process to be able to identify the important elements of systemic risk, to elevate those concerns to the appropriate level and then to act on those concerns in a timely manner. It will take the right people, with the right skill sets, operating in a system with the right culture and legal framework. I don’t believe creating this oversight process will be an easy task. Consider, for example, subprime lending. There were obvious excesses in terms of underwriting standards, product design and risk management. But addressing those issues during the boom would have required the supervisor to absorb attacks that reining in some of these practices would make it more difficult for some low- and moderate-income households to become homeowners for the first time. System dynamics In thinking about interconnectedness, we also need to focus on system dynamics. By system dynamics, I mean how the different parts of the system interact.
Caleb M Fundanga: Corporate social responsibility in Zambia Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Launch of the Mukuyu Tree (Slave Tree), Kabwe, 23 December 2006. *  *  *  • The Provincial Minister of Central Province • Hon. Sydney Chisanga, MP • Hon. Rev. Gladys Nyirongo, MP, Minister of Lands • Hon. Kakusa, MP • Your Worship, the Mayor of Kabwe, Mr Richard Yumbe • The Deputy Mayor of Kabwe, Mr Edward Phiri • The Town Clerk, Mrs Vivian Chikoti • Distinguished Invited Guests • Ladies and Gentlemen A very good afternoon to you all. It gives me immense pleasure to be here this afternoon in the town of Kabwe, which also happens to be the place in which I spent my childhood. As you are aware, we are here to celebrate the occasion of the lighting of the legendary MUKUYU TREE, popularly known as the Slave Tree. For many of you Kabwe residents present here, especially our senior citizens, this tree rekindles many happy memories of joyous occasions such as Christmas, Independence Day and Labour Day, when the TREE would shine brightly after being adorned with beautiful multi-fluorescent lights for all to admire. The MUKUYU TREE is one of Zambia’s national monuments. Its history spans more than a century of being part of the lives of the community in this area. Ladies and Gentlemen, This historic monument invokes memories of a sad but important aspect in our beautiful country’s history.

This experience, unfortunately, did not only affect us here, but the whole continent and beyond, touching lives far and wide. I am referring to the infamous Slave Trade Era. Historians, time and again, narrate to us tales of how this wonderful tree was used as the resting place for our forefathers, who were captured into slavery as they were marched across this land, being traded as commodities from Africa to far away lands. It is now common knowledge, rather than myth, that our fore-fathers were being traded under this same spot on which we stand today, proud and free. After the abolition of the Slave Trade, the TREE attained a new significance as a “rendevous” or meeting place. It was from under this very tree that some of our fore-fathers were recruited and taken to fight in the First and Second World Wars. As mentioned earlier, later came the happy times of celebrations at Christmas, Independence Day and Labour Day. In the year 2002, the Bank decided to recognize the historical significance of the Mukuyu Tree and depicted it on the highest denomination of Zambian currency, the K50,000 banknote. It was therefore a matter of concern for us when the Tree and its surroundings fell into a deplorable state due to the Municipal Council’s inability to meet the financial obligations attendant to its maintenance as a historical monument and national heritage site. The Bank therefore decided to adopt the Tree as part of its corporate social responsibility.
Ongoing increases in the prices of imported products have an impact on inflation in the advanced countries.4 This effect occurs through two channels. The first is simply mechanical, arising from the weight of imported goods in the basket of goods and services purchased by households. For example, food and energy account for about 30% of the average shopping basket in the euro area. Assuming that, as a result of increased demand from EMEs and insufficient supplies, commodity prices increase on average by 4% a year, more or less in line with the growth rate of the world economy (or long-term interest rates, according to the Hotelling rule), average prices in the euro area will increase by 1.2% simply because of the effect of these products. What about the implications for prices of other products? The remaining 70% of the basket includes manufactured goods and services, some of which are imported and others are produced domestically. Assume, for simplicity’s sake, that these goods are only produced domestically. If the prices of these products grow at a rate of 2% per year, the overall average inflation is 2.6%, exceeding the 2% objective of most central banks in advanced countries, including the ECB’s. If some of these goods and services are produced abroad, the rate of their price increase may be even higher, due in particular to the BalassaSamuelson effect that I mentioned previously.

Let me put it differently: is potential growth in those economies being affected by the fact that one part of the world, with nearly two-thirds of its population, is growing on average by 6–7% (or more) per year? If so, in what ways? One hypothesis which we may want to assess and test is that the so-called “long term equilibrium” variables which are so important in our economic models are in fact affected by globalisation, as advanced economies are becoming smaller and smaller. Not taking this into account may induce policy-makers to misjudge the situation and cause international surveillance to fail. These are clearly very difficult issues to examine. However, it seems to me that the analysis so far is insufficient. I won’t go into detail but would just like to pose some questions. Growth The first issue, or question, I would like to raise is whether the increase in growth rates in EMEs has had, and will have, a negative or a positive impact on trend growth in advanced economies. Taking a standard neo-classical trade model, the answer depends on various assumptions. The prevailing consensus is that globalisation provides opportunities for all, including advanced economies; their growth will not necessarily suffer. This is the conventional wisdom.
At the same time, our expectation for a moderate recovery in 2015 and 2016 remains in place. Demand should be supported by a number of factors. Among them are our monetary policy measures and progress made in fiscal consolidation and structural reforms in some countries. At the same time, high unemployment, sizeable unutilised capacity, and the still ongoing and necessary balance sheet adjustments are likely to dampen the recovery. Risks to the economic outlook continue to be on the downside. In particular, the weakening in the euro area’s growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk to the economic outlook. Inflation in the euro area remains very low. In October, it stood at 0.4%. We expect it to remain at around current low levels over the coming months, before increasing gradually during 2015 and 2016. Looking forward, we closely monitor risks to price developments. The latest monetary data point to subdued underlying growth in broad money. Its annual growth rate has increased moderately over recent months. It appears that the turning point in credit growth is now behind us, and credit growth rates, while remaining negative, are gradually improving. Monetary policy and financial fragmentation Let me turn to financial fragmentation, the first topic you suggested for today’s hearing.

For 2012, the inflation rate will amount to –0.7%. For 2013, we expect inflation of –0.1% and for 2014, 0.4%. In the foreseeable future, therefore, there is no risk of inflation in Switzerland. The third quarter of 2012 saw weak growth and a decline in trading activity worldwide. Although growth in the US economy and some of the emerging economies picked up, a mild recession persisted in the euro area. In Switzerland, real GDP in the third quarter increased again following a temporary downturn. For the fourth quarter, however, we expect significant weakening in growth. Consequently, economic growth in Switzerland for the year 2012 is likely to remain unchanged at around 1.0%. For 2013, we expect growth of 1.0–1.5%. The downside risks for the Swiss economy remain considerable. Although the measures announced by the European Central Bank (ECB) have significantly reduced the probability of extreme developments in the monetary union, there is still substantial uncertainty in connection with the management of the debt crisis in the euro area. It also remains to be seen how far the upcoming budget consolidation in the US will hamper growth. This question is weighing on the sentiment in the financial markets and the real economy. Moreover, momentum in the Swiss residential mortgage and real estate markets remains strong, and has led to a further increase in risks for financial stability. Global economic outlook I would now like to outline the outlook for the global economy and Switzerland in more detail.
Fiscal uncertainty has, however, emerged as the clear and present danger facing the US economy. The partial deal in Congress earlier this month has prevented the economy from falling over the fiscal cliff. But three inter-related fiscal challenges remain. •  First, the deferred budget sequester or spending cuts that kick in from March this year. •  Second, the debt ceiling that needs to be raised, beyond just the next six months. •  Third, and most important, a medium-term deficit reduction deal. 4. As it is, the partial expiry of previous tax cuts and exemptions could already be causing a fiscal withdrawal of about 1–1½ percentage points of GDP. If Congress fails to reach an agreement, the automatic spending cuts could impose an additional drag of 0.4% of GDP. Europe: strengthening the fiscal union while fighting a crisis 5. Europe has fared less well. As of 2012, the Eurozone economies have recovered less than 60% of the output lost during the crisis. For the last two years, the Eurozone has been caught in a vicious cycle between weak sovereigns and weak banks. The crisis has exposed basic design flaws in the architecture of the European Monetary Union, chiefly the absence of a fiscal union. 6. The challenges facing European policymakers are not trivial. They have to put in place the structures and policies necessary to address the design flaws of the currency union, while at the same time fight a recurrent crisis of confidence in the financial markets.

Given the long lags in monetary policy, central banks must look forward now and prepare a strategy for a smooth transition back to normalcy. Asian economies: dealing with desynchronised global macroeconomic cycles 31. The second key aspect in securing a return to normalcy is the adjustment of macroeconomic policies in the emerging market economies to spillovers from the advanced world. I will speak with reference to Emerging Asia. Continually shifting gears in monetary and fiscal policies 32. In the early stages of the financial crisis, most Asian countries responded with expansionary macroeconomic policies to dampen the effects of a collapse in exports. Between August 2008 and August 2009, policy rates across Asia were more than halved, on average. Substantial fiscal stimulus was injected, ranging from higher investment spending in China to significant tax cuts in Indonesia. Fiscal deficits across Asia widened from an average of 0.6% of GDP in 2008 to 3.0% in 2009. 33. From 2010 onwards, a two-speed recovery took hold in the global economy, with advanced economies growing sluggishly and Emerging Asia staging a vigorous rebound. Incipient inflationary pressures prompted central banks in the region to raise policy rates from mid–2010 onwards. Although renewed risks stemming from the Eurozone crisis led to a fresh round of easing in some economies in late–2011, policy rates in Emerging Asia are on average 75 basis points higher now vis-à-vis their troughs during the crisis. 4  BIS central bankers’ speeches  34. Fiscal stimulus has also been withdrawn progressively.
Third, to increase our prudence towards the financial system stability, we adopted new techniques for a more comprehensive systemic risk assessment, enriched stress test exercises with the “bottom up” approach and improved models for the indirect credit risk assessment. The twinning project concentrated most of its resources on supervision and financial stability. In addition to constant motivation for improving the regulatory framework, supervision activities and risk administration, this priority becomes even more necessary given added challenges related to specific developments over the past years. The Bank of Albania has undertaken a number of actions to face and overcome these challenges. For the fourth consecutive year, the Albanian economy has been under the influence of the global economic and financial crisis. Its latest stage, the sovereign debt crisis and its interrelation with the balance sheets of the financial system have placed us on the frontline. Our two main trading and financial partner countries, Greece and Italy, have been severely hit by the crisis. Against this unfavourable landscape, the Albanian economy has grown and has maintained its financial soundness. Private agents have an overall sound financial position, relatively low debt levels and positive savings rates. In contrast to other countries in the region, the Albanian financial system has continued to lend to the economy, although at slower pace and somewhat tighter terms. Building on an appropriate and flexible regulatory framework, this response has been determinant to encourage the restructuring of the economy and guide it towards profitable sectors.

On the part of the ECB, I can assure you that we stand ready to support the ESRB, in particular taking into account the important presence of the members of the General Council of the ECB in the ESRB and the fact that the ECB will provide the secretariat and analytical, statistical, logistical and administrative support to the ESRB, as required under the legislative proposals. Preparatory work at the ECB has been organised through the setting up of an ad hoc team and is under way so that the ESRB can take up its work after its formal establishment. The ECB is in the process of enhancing its capabilities for monitoring and assessing financial stability risks. Only a number of weeks ago, we reformed our Directorate Financial Stability and Supervision into a Directorate General Financial Stability with more resources. In all this, we also try to draw as much as possible on synergies with existing work and resources, both within the ECB and the European System of Central Banks (ESCB), the constellation of the 27 national central banks of the European Union. I would now turn to the panel and ask our guests to share with us their observations. BIS Review 47/2010  3
Svein Gjedrem: Experiences with the financial crisis Lecture by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics (CME)/BI Norwegian School of Management, Oslo, 30 September 2009. The text below may differ slightly from the actual presentation. * 1. *  *  Introduction  The last time I addressed this assembly was on 12 September 2008, only a few days before the US investment bank Lehman Brothers filed for bankruptcy. The Norwegian economy had entered a new phase. Low inflation and high growth were late in the upturn being followed by somewhat higher inflation and slower growth. Early summer the key policy rate had been raised to 5.75 per cent – a fairly normal level. It seemed that the elevated level of capacity utilisation in the Norwegian economy would gradually drift down. The economic conjuncture took a different turn. The Lehman Brothers’ bankruptcy on 15 September triggered a crisis with failing confidence in banks, counterparties and contractual partners and confidence in the future plummeted. The world economy entered into a sharp downturn. It became increasingly evident that the Norwegian economy would slow at a faster pace and to a further extent than we had envisaged. In August last year, manufacturing enterprises in our regional network reported that growth would hold up. In November, they described the turnaround as a “cardiac arrest”.

They are also a crucial part of how central banks set monetary policy. Cash is the only form of central bank money accessible by the general public. Another important term to bring in here is fiat money. Fiat money is state-backed money denominated in the national currency. Cash is a form of fiat money. Commercial bank money is only acceptable for wide scale use in the UK if it is denominated in sterling, convertible into sterling fiat money at par, and convertible on demand. Private providers of commercial money need to demonstrate they can meet these obligations so that individuals and business can have confidence in being able to regard different types of money as indistinguishable from cash, and be able to change it 1-for-1 on demand. Until recently in the UK, cash accounted for the largest number of payments (by number not value). 3 But in the UK the use of cash in transactions was declining before the Covid pandemic. With the impact of Covid and the UK lockdown, cash withdrawal volumes have dropped further. At their lowest during the UK lockdown, cash withdrawals were 60% lower in April 2020 than a year before. Even as the UK lockdown has eased, cash withdrawal volumes have remained low - in July they were around 40% lower than the year before.4 The increased use of non-cash payments places even greater importance on payments systems, which underlies the work the Bank is doing to upgrade RTGS. But, there is an increasing paradox in the area of cash.
This is drawn up quarterly, with each forecast having a horizon of three years. The inflation forecast gives us an indication as to whether our current monetary policy stance is appropriate for keeping future inflation within the range consistent with price stability. It is our compass, so to speak, showing us whether we are heading in the right direction. It plays another important role in that it gives the public an indication with regard to the need for monetary policy adjustments going forward. The inflation forecast is based on the assumption that a given interest rate remains unchanged over the entire forecast horizon. To date this has been the three-month Libor, and from now on it will be the SNB policy rate. This brings me to the third element of our monetary policy strategy. This determines how we communicate the level of money market rates we seek to maintain. To date, we have used the target range for the three-month Libor for this purpose. We will now do so by setting the SNB policy rate. In implementing our monetary policy, we will ensure that the secured short-term money market rates are close to the SNB policy rate. In this regard, we are focusing on SARON, the most representative of the short-term Swiss franc rates. SARON is an overnight rate. Given that we are now focusing on an overnight rate rather than a three-month rate, there is no further need for a target range.

François Villeroy de Galhau: Causes of and answers to the European slowdown Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the New York University, New York City, 16 October 2019. * * * Accompanying slides of the speech. Ladies and Gentlemen, dear students, I am very pleased to be with you today. Dear Thomas, both sides of the Atlantic benefit from your skills in economics. The high quality education you students receive here at the NYU Stern Business School will give you the tools to understand and address global challenges. In my introductory remarks today, I will address one of these, the current European slowdown, and quickly elaborate on 3 paradoxes: 1- the causes of the slowdown are mainly outside the euro area, but its effects are very acute on its biggest economy; 2 – the recent monetary policy controversy is of little interest for the future; 3 – the euro area has more policy room than others in the non-monetary domain, but under-uses it. **  I. The causes of the slowdown are mainly outside the euro area, but its effects are very acute on the region’s biggest economy The causes of the slowdown are mainly external to the euro area: uncertainty is undoubtedly the most important; it is mostly man-made, and must also be fixed by man.