samchain/econo-pairs-v1 huggingface dataset:
In this sense, the euro has been successful, and the current crisis in the euro area has not yet changed this to any marked degree. The euro is the world’s second-largest international reserve currency, after the US dollar, and is recognised in trade everywhere. Underlying it is one of the two largest and most efficient financial markets in the world. As is discussed in Chapter 2, inflation has been close to the 2% inflation goal for most of the euro’s existence, averaging 2.1% from early 1999 until mid-2012 and currently measuring just under 2½%. On the whole, the euro  BIS central bankers’ speeches  3  has retained its value against other currencies. At the end of August 2012, it was nearly 6½% stronger against the US dollar than at the beginning of 1999, and 4% above the average over the intervening period. Euro area payment systems have proven effective, even in the financial crisis. No controls have been imposed on movement of euro-denominated assets, either within or outside the euro area. As a result, there is no currency crisis in the area, and it is therefore misleading to speak of “the crisis of the euro” as such. This does not change the fact that the euro area is currently faced with a complex web of problems that, if worse comes to worst, could threaten its very existence if political support for the currency union wanes.

Accordingly, we have widened the list of the strategic objectives of the National Bank that now explicitly incorporate support of technological progress and financial innovations, as well as financial literacy as important tool for protection of consumers in the fintech environment. Regulators cannot control nor predict what innovation will look like in the future. However, given the benefits it brings, regulators can contribute to the development of a Fintech ecosystem by creating an enabling environment for the entry of new products or  2/4  BIS - Central bankers' speeches  new players into the financial services market. Usually, regulation is seen as a significant challenge for Fintech-led transformation. In this context, together with the Ministry of Finance, we have put a lot of effort to significantly update payment services regulation, which is currently going through a legislative approval process. The new legal framework for payment services embodies objectives that seek to foster innovation while ensuring a level playing field for all players, including newcomers. An important step in the same direction are efforts for digital identity verification of consumers that has a significant potential to drive greater levels of financial inclusion and financial accessibility. Regulators can enable, encourage and support innovations in financial services, by providing regulatory certainty and clarity. Considering this, in the National bank we established the so-called "Innovation Gateway",to serve as a central point of contact and communication channel between innovators in the financial industry, the central bank, and other relevant authorities.
5  The intention is to avoid a firm drawing on publicly-provided liquidity support mechanisms if they actually have a fundamental problem of solvency or viability. But liquidity risk can never be completely distinguished from solvency risk at a point of stress. 2  BIS Review 126/2010  facilities, reserve account holders can deposit with, or borrow from the Bank overnight for unlimited amounts at a penalty to Bank Rate. 6 Open Market Operations The Bank’s Open Market Operations (OMOs) take the form of reverse repo operations – economically equivalent to secured lending – at different maturities. Normally we would lend (cash) short-term for one week and longer-term for multiples of three months. Shortterm repos have not been needed regularly since we started to inject cash directly via the asset purchase programme. But normally short-term lending operations would take place weekly at a size designed to be consistent with the commercial banks’ aggregate reserve targets for that maintenance period. This short-term lending takes place against a relatively narrow set of high quality collateral – mainly government bonds. The price has usually been Bank Rate 7 and bids pro-rated. Short-term repos are not intended to provide any back-stop liquidity support. They are limited, competitive and take a narrow range of high quality collateral. They are designed to help implement the monetary policy stance. If there is excess central bank money in the system relative to reserve targets, the Bank can also drain cash out.

Recovery plans have fortunately not yet been tested, and it remains to be seen how they work in practice. Most importantly, however, recovery is not an end in itself, but a means to preserve financial stability. Entry into resolution should be possible if the recovery plan has failed to return the FMI to viability or if its implementation would otherwise compromise financial stability, for  1  See Financial Stability Board. “Consultation Document: Application of the Key Attributes of Effective Resolution Regimes to Non-Bank Financial Institutions”, 12 August 2013, and CPSS-IOSCO. “Consultative Report: Recovery of Financial Market Infrastructures”, 12 August 2013. See also P. Tucker. “Central counterparties in evolving capital markets: Safety, recovery and resolution”. Banque de France Financial Stability Review, No. 17, April 2013. BIS central bankers’ speeches  3  example if the application of a particular loss allocation tool turns out to overexpose certain (groups of) participants. Moreover, resolution may also become necessary if participants do not want to use the CCP any longer and prefer to wind it down. In conclusion, the resolution authorities have the responsibility (and are in a better position than CCPs) to do what is systemically needed in a crisis situation, which may mean in extreme cases that the application of resolution procedures is preferable to the activation of a recovery plan. Of course, much will depend on authorities doing the right thing at the time of the crisis.
Charles Bean: Pension funds and quantitative easing Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, to the National Association of Pension Funds’ Local Authority Conference, Cotswolds, Gloucestershire, 23 May 2012. All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  *  *  *  Thank you, Joanne (Segars), for that kind introduction. When I was invited to address this conference, I was asked to discuss how the Monetary Policy Committee’s asset purchases – colloquially, though rather inelegantly, known as quantitative easing or QE for short – affect pension funds. I was actually quite pleased to be assigned this brief, as in my view some of the commentary regarding QE has taken a rather partial view of its effects. Not only is the adverse impact of QE on pension funds often exaggerated, but the excessive focus on QE as a cause of low long-term risk-free interest rates also risks distracting attention from other factors driving yields which may present a more durable challenge to the sponsors and trustees of pension funds. To begin with, it may be helpful if I remind you how QE works and what it seeks to achieve. QE essentially involves us trading one liability of the state – gilts – for another – monetary claims on the Bank of England.1 The maturity structure of our purchases is designed to ensure that the gilts are largely sourced from private sector non-bank investors, such as insurance companies, pension funds and hedge funds.

In going beyond profit, VBI is set to be one of the drivers for Islamic financial institutions to assist entrepreneurs to grow their businesses. This would require an understanding of the entrepreneurs’ specific needs and circumstances prior to recommending a particular product or service, rather than focusing on a predetermined range of services. Islamic financial institutions are also expected to assist and guide businesses to adopt sustainable business practices. The financing model for businesses and SMEs will be more holistic; including provision of environmental-friendly business solutions, entrepreneurship training and consulting services. This model can better assist aspiring businesses to improve efficiency and reduce costs, which will lead to greater sustainability. Before I end my remarks, I would like to emphasise that the practice of Islamic finance is not and should not be exclusive to Muslims. Many of its underlying ideas, the pursuit of economic justice and risk sharing align with traditional and conventional economic thinking. Mutual insurance companies which derive from risk sharing, limited-purpose banking which moves away from interest-based or fractional banking and equity financing, are all ideas consistent with Islamic finance principles, and are practised across the world without any reference to the religion. Indeed, Islamic finance is for all. I hope that today’s programme will lead us to a step closer in bridging Islamic finance and businesses.
  Finally our balance sheet has a key role to play in supporting financial stability by providing insurance to banks and other financial intermediaries against liquidity risk – the risk that solvent firms cannot meet their financial obligations as they fall due. Of course we expect firms to self-insure against liquidity risk as part of prudent financial management. But it would be unrealistic and inefficient to expect them to insure against all shocks and so as a backstop we provide firms with the ability to borrow reserves (as well as dollars and euros). Liquidity insurance is very much an “old normal” – it goes back to Walter Bagehot in 1873 and his famous dictum to lend freely, at a high rate of interest and on good banking securities. But it is worth noting that, whilst liquidity insurance is an “old normal”, our current suite of facilities is much expanded over the last fifteen years. The Bank learned lessons from the GFC, launching a revised Sterling Monetary Framework in 2013 under an approach Mark Carney, the Bank’s former Governor and another former student of Peter’s described as Open for Business10. This expanded toolkit is just as much a part of the “new normal”.11  Of course the financial system is constantly evolving.

13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  Figure 7: Climate metrics for the APF corporate bond portfolio  Taken from “The Bank of England’s climate-related financial disclosure 2020”,  It is worth saying that the question of how best we might incorporate climate considerations is not a straightforward one. Simply labelling firms as “green” or “not green” at a point in time isn’t necessarily enough; what is needed is an approach that would incentivise companies to make the transition from one state to the other. As Andrew Bailey, the Bank’s Governor, has said, including at our most recent Monetary Policy Report press conference in February, work on this is already under way at the Bank. But any change in approach, to a new “future normal” for policy, could only be made if it was consistent with the remit given to us by the Government. The outlook for QE  I want to finish by saying a few words about how I see the outlook for monetary policy and QE as of today, eleven months on from our initial response to the Covid pandemic. My overall take on QE is still that it is a tried and tested tool; for me it is the marginal monetary policy tool at present. I said in a speech I gave in October that we had QE “headroom” remaining28. And although we have announced £ more QE since then, that still remains the case.
That might suggest that interest rates should have been lower. Equity prices rose by 120% between 1995 and 2000, before falling 40% subsequently. Presumably that would have implied first higher and then lower interest rates. What this means is that asset prices cannot sensibly be viewed in isolation, but only in the context of the economy as a whole. I believe that, although there are justifiable concerns about recent movements in asset prices, the policy dilemma can be analysed within the framework of inflation targeting that we have in the UK. No honest person actually knows the “equilibrium” level of asset prices. They are dominated by expectations of the prices that other investors will pay for those assets in future. The relevant uncertainties can rarely be quantified by observing the frequencies of events in the past. And the response of asset prices to changes in monetary policy is also unpredictable. So targeting asset prices directly is virtually impossible. But changes in asset prices can have a major impact on levels of spending and the MPC devotes considerable time to the question of how such changes should affect policy. 6  Electrical appliances and audio-visual equipment share was 0.021 in 1956 and was 0.018 in 2002. 7  See Boskin M et al (1996) ‘Towards a More Accurate Measure of the Cost of Living’. Final report to the Senate Finance Committee from the Advisory Committee to Study the Consumer Price Index. 8  The most rigorous statement of the case for stabilising asset prices is Dupor (2002).

And if many firms make these mistakes at the same time then the result is an unnecessary fluctuation in aggregate output. Another decision affected by uncertainty about prices is investment. Many investments are specific to a particular model or product, and so they become sunk costs. For such irreversible investments it may pay to wait before investing since time will resolve some of the uncertainty. A Premiership football team may decide to postpone the construction of a new stadium until their survival in the League is assured. Or a car manufacturer may postpone a decision about opening a new plant to see if a rise in demand is temporary or appears likely to last. And that uncertainty could stem from a difficulty in disentangling relative from absolute prices. In the language of finance, there is an option value to waiting when there is uncertainty about the returns on an irreversible investment. So a project must offer a rate of return sufficient not only to cover the cost of financing of the project, but also the option value to waiting. That may explain why surveys of firms show that their hurdle rates of return are often well in excess of the cost of either equity or debt finance. For example a CBI survey last year found that the average real hurdle rate for UK firms was 11.3% - down from rates of around 15% in surveys conducted in 1994 - but still well above the cost of financial capital.
In this case, the “what if” question might be, “What’s the likely effect if national house prices did fall by 25 percent, enough to bring the price-to-rent ratio back to its historical average?” Before going any further, I want to emphasize that I’m not making any predictions about house price movements, but instead, simply discussing how a prudent monetary policymaker could assess the risk. First, there would be an effect on consumers’ wealth. With housing wealth nearing $ trillion today, such a drop in house prices would extinguish about $ trillion of household wealth—equal to about 38 percent of GDP. Standard estimates suggest that for each dollar of wealth lost, households tend to cut back on spending by around 3½ cents. This amounts to a decrease in consumer spending of about 1¼ percent of GDP. To get some perspective on how big the effect would be, it’s worth comparing it with the stock market decline that began in early 2000. In that episode, the extinction of wealth was much greater—stock market wealth fell by $ trillion from March 2000 to the end of 2002. This suggests that if house prices were to drop by 25 percent, the impact on the economy might be about half what it was when the stock market turned down a few years ago. Moreover, the spending pullback wouldn’t happen all of a sudden. Wealth effects—positive or negative—tend to affect spending with fairly long lags.

Finally, while business investment in equipment and software rose strongly last year, by almost 14 percent, the level of investment is still not as high relative to GDP as we’d expect, given favorable economic conditions and firms’ healthy balance sheets. Economic growth has been solid for a few years now. And, with the very low level of interest rates, borrowing costs can’t be the problem. Moreover, profit margins have been high for some time, so firms are certainly not strapped for cash. The shortfall might be due to business caution, perhaps related to reverberations from 9/11 and subsequent terrorist threats and actions or perhaps to the corporate governance scandals and the adjustments required by the legislation that followed them. Alternatively, the investment shortfall might reflect the perception by businesses that productivity gains can be realized at this stage that do not require major new investments in equipment and software. Whatever the explanation, the consequence of these drags is that the Fed had to keep interest rates exceptionally low for a long time just to get respectable, but not stellar, economic growth. In fact, the federal funds rate was lowered all the way to 1 percent and held there until the middle of last year. Since then, the FOMC has raised the funds rate nine times to 3¼ percent, but it still remains in a range normally considered stimulative. Bond rate conundrum Increases in the federal funds rate typically lead to increases in longer-term interest rates.
Annual growth in salaried employment has picked up again in recent months, although job creation in the most cyclesensitive sectors has remained slow. Meanwhile, nominal wages continue to grow at a strong pace, partly because they are generally indexed to past inflation (figure 6). Although the low  2  BIS central bankers’ speeches  level of unemployment seems to conflict with the state of the business cycle, there are some structural factors that might explain the unemployment rates below historic averages, such as changes in the demographic composition of the labor force (figure 7). Turning to our projections, in the baseline scenario GDP will grow in 2015 more than it did in 2014 and will stand between 2.5 and 3.5 percent, not very different from the December forecast. In this projection, GDP growth will remain below the medium-term growth estimate, which we place between 4 and 4.5 percent. The baseline scenario also assumes that in the first half of the year the economy will post a growth rate near the average of the past few months, with a recovery process that will become more visible towards year’s end. Growth in final domestic demand – without inventories – is revised downward from the December projection. This, because of a slower than expected recovery of both private consumption and investment, particularly the imported components. With this, total domestic demand growth drops to 2.5 percent annually.

True, our baseline scenario contemplates, among other assumptions, that such dynamism will be accompanied by improved agents’ expectations. As we have said before, this is a sensitive point that requires us all to cooperate. We must also bear in mind that the terrible natural disaster that just hit the north of our country will have some effect on the output figures that will be released in the coming months, which at this moment we can only guess and which will be able to assess only as time goes by. Moreover, as we well know, every adjustment process has its costs. In our case, the main associated cost has been higher inflation. In recent months inflation has exceeded forecasts and we estimate that it will remain above 4 percent for a longer time, strongly influenced by the depreciation of the peso, which has been greater and more persistent than previously thought. Thus, although we understand that higher inflation is part of the adjustment process I have described above, I want to be clear that its current levels have exceeded our estimates, and that inflation being above the upper limit of the tolerance range for several months in a row is a situation that does not leave us satisfied.
Other regulatory measures, such as the LCR or the NSFR, are found to have had no statistically significant impact so far on repo volumes. The study also highlights that the more significant falls in banks’ outstanding repo volumes at year-end are likely to have also been driven by additional factors, such as contributions to the single resolution fund or national bank levies. These findings are not the final word on the matter, of course. The repo market is in a state of transition as the report by a study group of the Committee on the Global Financial System (CGFS), chaired by Bank of England Deputy Governor Jon Cunliffe, recently concluded. In this respect, the CGFS also recommended in April that a further study on repo markets be undertaken within the next two years. This means that policymakers will continue to closely monitor developments in repo markets and financial markets more generally. Some effects can only be thoroughly assessed once the reforms have been implemented more meaningfully, while others may become clearer at an earlier stage. For example, it seems undisputable that regulatory reforms have contributed to temporary volatility in repo market activity on reporting dates. Specifically, window-dressing behaviour of banks appears a likely unintended effect of regulation. I would therefore encourage further analysis of methods that could help reduce volatility and thereby contribute to a smoother functioning of markets.

Benoît Cœuré: Asset purchases, financial regulation and repo market activity Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the ERCC General Meeting on "The repo market: market conditions and operational challenges", Brussels, 14 November 2017. * * * Let me thank the organisers for inviting me here today.1 The repo market is a cornerstone in the transmission of monetary policy. In its traditional role, it is a prime short-term funding market for banks. Before the outbreak of the global financial crisis, secured transactions accounted for around a third of the daily turnover in euro area money markets according to money market statistical reporting (MMSR) data. Today, their share is closer to two-thirds. Movements in short-term repo rates therefore change the market-based financing conditions for banks and, hence, their conditions for trading with their ultimate customers – firms and households. This means that repo rates are a prime channel through which changes in the monetary policy stance are transmitted to the broader financial market and the real economy. In addition, the repo market plays an important intermediation role in the financial system by being the main vehicle for sourcing and financing government bonds. In this role, the repo market critically supports the liquidity of the bond market. It offers investors the possibility to finance long positions and to borrow securities to deliver into short positions. Interruptions in the repo market may therefore affect the entire term structure of interest rates.