samchain/econo-pairs-v1 huggingface dataset:
Within limits, it has tolerated periods of above-target inflation in order to support the real economy, while at all times respecting the primacy of the inflation target. That said, it is important not to over-interpret these results. Specifically, the MPC’s average revealed lambda in the past does not reveal a simple monetary rule that can govern decisions regarding inflation control in all scenarios in the future. I stress this point because some have suggested monetary policy ought to follow, or be evaluated against, a simple rule, such as a Taylor (1993) rule. 21  But it is important to recall that, while such rules were estimates  of actual stances of past policy – positive descriptions of central bank behaviour – they have been reinterpreted as guides for what the central bank should do in all circumstances – normative prescriptions. Taking the past as a strict guide to the future is to assume that the nature shocks does not change and that the structure of the economy remains constant. Such stability is hard to square in an era of financial crises; deep, variable technological change; and potentially large shifts in openness. In a changing world, monetary policy decisions would more properly emerge from optimal control approaches to monetary policy, which respect the different nature of shocks and circumstances which the monetary authority must weigh in setting its strategy.

That influence tempted 1  See Tobin (1972), “Inflation and unemployment”, American Economic Review, 62. Inflation can have large redistributive effects. Volatile inflation arbitrarily re-distributes wealth across borrowers and savers. And most recently, there has been a debate about how the stance of monetary policy has affected the distribution of wealth and income. In a series of recent analysis and speeches, members of the MPC have shown that, while distribution is not an objective of monetary policy, the evidence strongly suggests that policy since the crisis has been associated with better outcomes. 2  2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches  2  authorities to promise low inflation in the future, but then to renege in order to boost activity. Electoral cycles 3  reinforced this predisposition. Firms and households began to anticipate these incentives, however, and eventually pre-empt them. The economy ended up in a worse equilibrium with higher inflation and 4  unemployment. Such time-inconsistent policies contributed to excessive inflation and higher structural unemployment in the UK during the 1970s and 1980s (when inflation averaged 9.5% and unemployment over 7.5%). In light of similar experiences, many societies came to recognise that macro outcomes can be improved by having society first choose the preferred rate of inflation and then delegate operational responsibility to the 5  monetary authority to take the necessary monetary actions to achieve that objective. By “tying the hands” of authorities, time inconsistency is resolved and better outcomes for both inflation and unemployment become possible.
On Sunday, September 14, we learned that Barclays could not proffer the needed guarantee without a shareholder vote. This vote would take days, if not weeks or months, and there was no way to predict if the shareholders would even vote for the transaction to proceed. I explored with counsel whether the U.K. government, or one of its instrumentalities like the FSA, might waive this U.K. requirement, such that the guarantee could be delivered and the rescue effected. I learned that the U.K. authorities were not amenable to a waiver. Thus, Barclays ceased to be available as the willing buyer that we needed to rescue Lehman, and there was no other interest from any firm of sufficient size and capability that could acquire Lehman, a company with consolidated assets of about $ billion. 5  Timothy F. Geithner, Secretary of the Treasury, Statement before the United States House of Representatives Committee on Financial Services, April 20, 2010. 4  BIS Review 112/2010  Many have asked why, when the Barclays guarantee problem presented itself, the Federal Reserve did not step forward and guarantee the trading obligations of Lehman pending its merger with Barclays. They observe that we lent approximately $ billion to Maiden Lane LLC to facilitate the merger of J.P. Morgan Chase and Bear Stearns, and they look at our commitment to lend up to $ billion to AIG.

With the introduction of the TSLF and the PDCF, the New York Fed sent small teams of two monitors into each of the four remaining investment banks, Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers – something it had never done before. Let me again emphasize that we were not intending to conduct supervisory activities with our personnel, nor were we attempting to displace the SEC, the primary regulator of the investment banks. To the contrary, we were acting as a potential lender to these potential borrowers, and we wanted to know our new borrowers better. Because of concern that our monitoring role could be misunderstood or misconstrued, Vice Chairman Donald Kohn described our objectives in public testimony. He said that the on-site monitors had two narrowly tailored goals: (1) to ensure that any credit that the Fed extended to the investment banks would be repaid, and (2) to ensure that the investment banks did not become too dependent upon Federal Reserve credit and would continue to work on improving their liquidity positions and financial strength. 2 The Federal Reserve monitors did not take on the broader responsibility of  1  Mary L. Schapiro, Chairman, U.S. Securities and Exchange Commission, Testimony Concerning the Lehman Brothers Examiner’s Report, before the United States House of Representatives Committee on Financial Services, April 20, 2010.
The long-term downward trend in interest rates globally and expansionary monetary policy occasioned by cyclical factors have therefore combined to produce historically low interest rates. Transmission channels of negative interest rates in Switzerland Irrespective of the equilibrium rate, questions arise regarding the transmission mechanism of monetary policy below the zero lower bound. Specifically, how does monetary policy using negative interest rates effect a rise in inflation? As you will probably remember from your student days, monetary policy usually operates through a variety of transmission channels. For a small open economy like Switzerland, the exchange rate channel is the most important. Lower interest rates, other things being equal, make the Swiss franc less attractive as an investment currency. The franc loses value, which makes Swiss goods cheaper abroad, and leads to a rise in net exports. This in turn raises GDP and inflation in Switzerland. Depreciation of the Swiss franc also has a direct impact on inflation because import prices rise. A reduction in interest rates also operates via the credit channel. Put simply, if the SNB reduces the short-term interest rate, longer-term market rates also fall. Loans become cheaper and this stimulates consumption and investment. These factors boost the economy and inflation rises. Page 4/16  Is the negative interest rate in Switzerland having the anticipated effect? Let me first look at transmission via the exchange rate channel. Historically, Switzerland has always had lower interest rates than most other countries, particularly euro area countries.

One prime example of this preventive work is the recent joint statements from the CNMV and the Banco de España warning the general public of the risks in relation to crypto-assets. Another example, specific to financial education, is the set of actions envisaged under the National Financial Education Plan. 1  We support this preventive work by exercising our corrective powers, wherever regulations and jurisdiction so allow, and by advocating legislative initiatives with regulators and legislators to remedy any shortcomings that we identify. The main strength of this protocol is that it deepens the cooperation needed to efficiently and effectively carry out our functions. This collaboration will also help to delimit each signatory’s respective field of action. Close cooperation between supervisors is particularly important in this domain, since we are often confronted with schemes that do not fit easily within a single regulatory field or sphere of competence. The idea is to avoid any grey areas where potential criminals can commit financial fraud. Not only are financial supervisors involved in the protocol, but so too are players as important and diverse as the public prosecution service, law enforcement authorities and associations representing notaries, registrars, the financial sector and the media. This, we are certain, will be a critical advantage in our efforts to combat financial fraud in both the preventive and corrective dimension. A warm welcome, then, to this initiative, which will have the Banco de España’s full support. 2
These challenges exist for all participants in these markets: for the institutions that underwrite, structure and distribute these risks; for those who trade or hold them; and for third parties, like the rating agencies. These challenges of complexity are significant as well because they can exacerbate the problem of dealing with classic principal-agent problems. You can see this in the subprime mortgage market where, for example, a person may be rewarded for generating new mortgages on the basis of volume, without being directly exposed to the consequences of default; but these problems exist wherever incentives diverge and contracting is imperfect. Financial institutions typically maintain a range of different checks and balances to deal with the risk of misaligned incentives: for example, between a trader and the principal whose resources are at risk, or between the mortgage broker or underwriter and the firm that ultimately ends up holding the risk. But these checks and balances depend in part on the capacity of risk managers to observe and understand the underlying economic risk in these instruments. Where that is harder because of this combination of complexity, imbedded leverage, and short loss history, then market discipline will be weaker. A third issue relates to the dynamics of failure and the infrastructure that supports these markets. The dramatic growth in the volume of over-the-counter derivatives and the growth in the number and size of leveraged funds inevitably complicate the resolution of the failure of a large financial institution that is active in these markets.

Timothy F Geithner: Credit markets innovations and their implications Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the 2007 Credit Markets Symposium hosted by the Federal Reserve Bank of Richmond, Charlotte, North Carolina, 23 March 2007. *  *  *  I am grateful to Jeff Lacker for including me in this conference, and my compliments to him and the Richmond Fed for bringing together an excellent group to discuss the implications of recent innovations in credit markets. The past few years have seen remarkable changes in credit markets, and this is a good time to take stock of what we know about those developments and their implications. The latest wave of credit market innovations has elicited some concerns about their implications for the stability of the financial system, concerns similar to those associated with earlier periods of rapid change in financial markets. Will the most recent credit market innovations amplify credit cycles, contributing to "excessive" lending in times of relative stability, and then magnify the contraction in credit that follows? Will they introduce greater volatility in financial markets? Will they create greater risk of systemic financial crisis? These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed.
Indeed, what is worrisome is that the dimensions of the crisis that follow the Lehman collapse were no anticipated by the authorities. With the benefits of hindsight, it would have been better to avoid the collapse, and its effects should have been foreseen by policymakers. The consequences of the financial crisis will spread past the financial system, as is already perceived in recent discussions on privatization of earnings and socialization of losses. Hopefully this debate will soon focus on the important issues, but we must recognize that the excessive aggressiveness and ambition of some players in the international financial markets, the irresponsible behavior of operators unaware of what they were trading, and lax risk assessment and regulation, will penalize the innocent and the guilty alike. A sound, competitive financial system is essential for economic development. The incentive structure is key for its smooth operation. If no credit exists, only those owning the resources could invest or buy durables. The financial markets allow the anticipation of consumption and invest. But its stability must be safeguarded to ensure efficient credit allocation and proper risk management. One issue that has been discussed in monetary policy theory and practice is how to handle bubbles. The conventional view is that nothing can be done to prevent them; that they cannot be detected, that they must be a cause for concern only to the extent that they affect inflation, and that the only thing to do is to clean the mess after they burst.

Should we conclude, therefore, that in the absence of a world government, the identification of “new rules of the game” is likely to be no more than a theoretical exercise? Certainly, the fate of Keynes’ proposal for an International Clearing Union is not encouraging. But the experience of the past twenty years shows that large imbalances mean that everyone suffers when there is a sharp adjustment. So there is scope, if not for formal international policy coordination, then for an international conversation about how to improve a system that is fragile. Central banks were able to ensure, for a while, that the paths of output were sustainable – consistent with low and stable inflation. But the patterns of demand were far from sustainable. And when the sharp adjustment to demand eventually came, it inevitably had implications for the level of output. Reform of the IMFS, and of our domestic financial systems, is a necessary complement to the domestic price stability oriented policy frameworks of central banks. The immediate issue of how to move to a more sustainable position requires a resolution of different countries’ economic strategies for rebalancing. There can be only one path for rebalancing – with rebalancing in the deficit economies, by definition, just a mirror of that in the surplus countries. But the path that would be chosen by high-saving economies differs from that which the more indebted industrialised economies would prefer.
Increasing capital is one way to get leverage down; that is why governments in the US and other affected countries forced banks to raise more capital privately or else  12  BIS Review 101/2009  accept injections of extra capital financed by the taxpayer. Extending guarantees on funding, whether retail or wholesale, is another way to make creditors believe that they will get their money back, as are measures to insure or quarantine the risky bad assets. An open question is therefore whether the banking system will be able to support an adequate volume of credit as the extensive network of public support is removed. If not, then further attempts to de-leverage are possible. And de-leveraging through the restriction of new loans generates a positive feedback loop analogous to that through asset sales. Deleveraging by restricting credit growth may be privately rational, but if every intermediary tries to do the same, the result will be lower activity and higher defaults and little improvement in leverage ratios – what, to paraphrase Keynes, we might describe as the “paradox of deleveraging”. A recent insightful contribution from Gertler and Karadi (2009) explicitly captures the role that de-leveraging can play in slowing a recovery when financial intermediaries need to hold capital in order to convince creditors that they will be repaid. Policy: cure and prevention The severity of the financial crisis and the sharpness of the contraction in activity have prompted an aggressive response by policy makers.

While as a general rule I am against this invasion of jargon, perhaps in this specific case the initials are preferable to the longer version, because IPSs, the focus of this conference, are not merely “institutional protection schemes”, or legal instruments suitable for securing the benefits of consolidation under capital regulations. They are and should be much more than that. IPSs have arisen as an innovative structure in the banking system and, like all new products, they are best evaluated by organising their assessment in steps, or successive degrees of scrutiny, so that at the end of the process their structure can be fully appreciated. The first step in the process of evaluation will be to judge whether they are timely. The second will focus on their design and construction. The third will be a “use test”. And the fourth and final level of assessment will look at how readily they lend themselves to progressive development so as to cover potential future needs. Allow me to cover these successive steps or facets one by one. Let us start with the first, their timeliness. IPSs are a response to an unquestionable substantive need: the downsizing of the Spanish banking sector, following the excesses of the growth period prior to 2007. These factors left many institutions facing the challenge of a future far removed from the comforts that had characterised the previous period, namely: strong economic growth, abundant liquidity on international markets, extensive business margins and healthy assets.
The range for this year has been upgraded from June, based on actual data above projections in the first half and more dynamic figures available for thirdquarter demand and output, which are foreseen to continue into the first half of 2011, prompting output gaps to close in this latter period (figure 7). For the year 2011 GDP is expected to grow by 5.5%–6.5%. Moderation of world growth towards 2011, the dissipation of one-time effects of the crisis and 27-F, plus the gradual withdrawal of monetary policy stimulus will result in both output and domestic demand slowing down by the second half of 2011. It is worth noting that y-o-y GDP growth figures in the second quarter of 2011 will be high due to the low basis for comparison associated to the earthquake. Similarly, once the swelling of domestic demand is finished, it should expand next year at a rate the half of the strong growth it should post this year. This will come accompanied with more dynamic export volume growth that will revert the tough 2009 and 2010 years, when exports were affected by the global recession and by the disruptive effects of the earthquake (table 2). The rebound of the Chilean economy is also apparent in a dynamic labor market, where employment is growing strongly and the rate of unemployment has dropped (figure 8).

Concluding remarks Let me finish with some short reflections. After several years of heavy turbulences and natural disasters, the Chilean economy is on a very good standing to continue on a path of sustained growth. Price stability has been preserved, preventing inflation from affecting the purchasing power of citizens, especially those with less income and thus less capability to protect themselves against this menace. Growth has consolidated, pushing the rate of job creation to levels we had not seen in years. The contribution of monetary policy to this good performance is unquestionable. It has been flexible enough to be able to be applied when facing sharp changes in the economic environment, with no unnecessary dogma or rigidities. In order for this process to continue over time it needs to be balanced and operate in the context of an inflation rate in line with the target. Otherwise it will become just an unsustainable acceleration calling for drastic adjustments with its related costs in lost output and employment. Evidently, as a country we continue to face challenges, particularly related to maintain sustainable growth rates for long periods and not create tensions on price stability. Guaranteeing low and stable inflation is the best contribution that the Central Bank of Chile can make to prosperity in this new century of independent life that is beginning for our Republic. Thank you.
The outbreak of the coronavirus crisis in the spring of 2020 caused enormous financial turbulence, including the biggest stock market fall in one day so far in Sweden.3 All bond rates rose to a varying extent. The new motto for investors was ‘dash for cash’, as they abandoned unsafe assets in favour of safer ones with high liquidity.4 During the crisis, the Riksbank's monetary policy focused as far as possible on maintaining interest rates at a low level and maintaining the supply of credit so that the real economy could function. A key element in our response to the crisis was extensive purchases of bonds (see Figure 2).5 The very fact that all bond yields rose to varying degrees made a broad palette of asset purchases necessary to hold interest rates at a low level. The Riksbank purchased government bonds, covered bonds, municipal bonds and corporate bonds. 6 We took framework decisions for the total asset purchases, which we then distributed over the different asset classes through regular decisions at the monetary policy meetings held. Initially, the framework was set at SEK 300 billion in March 2020 and then expanded to SEK 500 billion in June and to SEK 700 billion in November of the same year. In connection with the decisions in June and November 2020, we extended the purchases from the end of 2020 to first the middle, and then the end, of 2021.

With respect to bank capitalisation, the situation remained largely unchanged in 2014. First, the domestically focused commercial banks’ leverage ratios remained stable at high levels by historical standards. Second, these banks’ risk-weighted capital ratios increased slightly and are significantly above regulatory minimum requirements overall. Furthermore, stress test results suggest that most domestically focused banks should be able to absorb estimated losses without seeing their capitalisation fall below the regulatory minimum. Nevertheless, under the most relevant adverse scenarios for these banks, the losses would deplete a large proportion of their surplus capital. Experience in Switzerland in the 1990s, as in other countries, suggests that this would lead to a general weakening of the banking sector and significantly affect banks’ ability to lend, with negative and lasting repercussions for the real economy. The stress test results highlight the importance of banks holding significant capital surpluses relative to the regulatory minimum requirements. The activation of the countercyclical capital buffer in 2013 and its increase in 2014 has made a significant contribution in this respect. 2  BIS central bankers’ speeches  Risk of renewed increase in imbalances on mortgage and real estate markets Overall, imbalances on the mortgage and residential real estate markets have remained broadly unchanged since the last Financial Stability Report. From a financial stability perspective, this is a positive development. However, it is still too early to give the all-clear. On the one hand, imbalances remain at a high level and have not yet started to decline.