samchain/econo-pairs-v1 huggingface dataset:
•  The fact that monetary policy has an impact on financial stability does not necessarily mean that it should directly seek to achieve it. Monetary policy and financial stability: uncomfortable bedfellows? Let me offer two reasons why operationalising a financial stability role for monetary policy may be difficult. Leaning against winds from opposite directions? First, conflicts could arise between the price stability and financial stability objectives. •  Financial cycles are typically longer than business cycles, and the two cycles may diverge. •  The interest rate appropriate for price stability may not be consistent with financial stability. •  How does one lean at the same time against two winds blowing from opposite directions? One reason why the winds might blow from opposite directions, especially for emerging economies, is the role played by international liquidity and capital flows. •  Philip Lane has detailed the strong inter-linkages between global liquidity conditions, international debt flows, and domestic credit conditions. •  Maurice Obstfeld argues that because of the impact of financial globalisation, monetary policy carries a big burden trying to achieve both financial stability and macroeconomic stability. The experience of Emerging Asia during 2010–2013 is illustrative. •  Asian economies were broadly in full employment with low inflation and some downside risks to growth from the Eurozone crisis. 4  Borio, C and Zhu, H (2008), “Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?” BIS Working Papers, No. 268, Bank for International Settlements, December.

4  BIS central bankers’ speeches  And the microprudential framework has indeed been strengthened post-Crisis. The Basel III reforms will go quite some way to make banks more resilient and financial systems safer. •  The quantity and quality of capital have been increased. •  There is for the first time, a global liquidity standard. •  There will soon be a direct cap on bank leverage. •  Systemically important banks will be subject to higher loss absorbency and more intrusive supervision. Besides these reforms, I would add that traditional microprudential limits that apply “through the cycle” are just as important in helping to maintain financial stability. If volatility in the real estate sector has repeatedly been shown to contribute to financial imbalances and distress: •  does it not make sense to put limits on financial institutions’ exposures to real estate? •  does it not make sense to require that loan-to-value ratios for property loans be less than 100%? •  does it not make sense to require the loan underwriting process to incorporate an assessment of the debt service ratio? I do not know if the Global Financial Crisis could have been avoided if interest rates in the US had been higher in the preceding years as some have argued. •  I do suspect though that if there had been prescribed loan-to-value ratios and debtservice ratios, the sub-prime problem may not have grown to such proportions.
Chart 3 shows the share of HICP items experiencing price falls, year on year. In terms of expenditure weights, around 20% of the HICP items reported negative annual growth rates in May 2009. This share has increased recently but it remains not so distant from the average of the last decade. Excluding food and energy, the share was lower at 14%. The share of items with negative inflation is subject to significant volatility, partly owing to seasonal factors, such as sales in the shops at certain times of the year. This makes the measure more difficult to interpret. However, it is possible to take account of these factors by comparing the proportion of items with negative inflation rates in any given month with the historical average for the same month. As you can see from chart 4, the share of items with negative inflation rates (excluding energy and food) in the year to May was only a touch higher than the historical average, further confirming that there have been no widespread price cuts so far. Let me dwell on this point. Chart 5 shows the distribution of the annual rates of change in all the items included in the HICP basket, weighted by their expenditure share. This also suggests that price cuts are not generalised, but are concentrated on few items. In May this year the bulk of the distribution – around two- thirds – showed inflation rates above 1%, with some items (heat energy) recording an inflation rate above 10%.

At the same time, over 1,100 renminbi correspondent accounts were maintained by overseas banks with banks in Hong Kong. The amount due to and due from such overseas banks amounted to RMB 128 billion and RMB 146 billion respectively. This is a clear indication that banks from around the world are using Hong Kong’s robust platform and large liquidity pool to offer renminbi services to their customers at home. As more and more companies and financial institutions conduct business and transactions in the renminbi, we will see an increasing number of financial centres offering offshore renminbi business in different parts of the world. These centres can benefit significantly from having an access to the offshore renminbi platform and liquidity pool in Hong Kong. The HKMA is taking proactive steps to aid the private sector in this endeavour. The private sector led Hong Kong – London Forum is an excellent example of this effort. The Forum just held its first meeting in Hong Kong in May this year, and agreed on a number of joint actions in the areas of renminbi liquidity, payment and settlement arrangements and development of products and services, to bring mutual benefits to the growth of offshore renminbi business in Hong Kong and London. One of the key action points agreed at the Forum is to expand cross-market renminbi funding activities through the cross-border collateral management arrangement that will be launched jointly by the HKMA, Euroclear and J.P. Morgan on 25 June.
Examples of HRH’s leadership range:   From domestic initiatives within The Prince's Responsible Business Network to help ensure UK businesses and communities are resilient to the effects of climate change;    To launching the ClimateWise Principles and encouraging the insurance industry to take a leading role in addressing risks posed by climate change;    To support for our hosts Accounting for Sustainability, who have for many years given practical guidance to firms on how to embed sustainability considerations into business decision-making. I have had the great pleasure of engaging with HRH on a number of occasions, and I can think of few people more knowledgeable about the sustainability agenda or as committed to it. Four years ago, he rightly put me on the spot, highlighting that climate-related risks will have serious financial impacts, and asking what regulators were doing about them. HRH’s challenges are even more germane today as the impacts of climate change continue to mount and the time to act continues to shorten. This year has seen blistering heatwaves in North America and Europe, hurricanes in North America and typhoons in South East Asia; droughts in Southern Africa and Australia; unprecedented rainfall causing deadly landslides in Japan; and now the devastating wildfires in California. The human costs of these events are immeasurable. And the financial losses are significant. Last year set a record for weather-related insurance losses at around $ Losses in 2018 may again be among the worst in history.

Based on the backdrop of the economic development and the outlook for continued high energy prices ahead, a mechanical application of the 4 per cent fiscal rule implies that the use of petroleum revenues will increase by more than NOK 31 billion from 2006 to 2009. With continued solid growth in the Norwegian economy, it would be in line with the fiscal rule if the use of petroleum revenues is lower than the expected real return on the Government Petroleum Fund – Global over a few years. We estimate an approximately unchanged structural non-oil deficit in 2007, and assume that fiscal policy will provide some stimulus to aggregate demand and output in 2008 and 2009, but somewhat less than a mechanical application of the fiscal rule based on our oil price assumption would imply. The authorities conduct fiscal policy knowing how monetary policy will react. Today’s flexible inflation targeting regime, giving weight to both variability in inflation and variability in output and employment, establishes a firm framework for monetary policy and provides clear guidelines on how monetary policy is to respond in different situations. Monetary policy in Norway is oriented towards low and stable inflation, with annual consumer price inflation of close to 2.5 per cent over time. Flexible inflation targeting builds a bridge between the longterm objective of monetary policy, which is to keep inflation on target and provide an anchor for inflation expectations, and the more short-term objective of stability in the real economy.
Importantly, it improves the decisions they make, nationally and locally, governments and citizens. Weather is by no means a unique example. Micro-level data, digital twins and massive-scale simulations are being used to better understand all manner of other systems at all manner of resolutions – from the sub-atomic scale when seeking the Higgs-Boson, to the global scale when modelling flows across oceans, the world wide web and galaxies. All have benefitted from drawing on mass micro-level data, crowd-  sourced, centrally-stitched, micro-to-macro. Until recently, fewer such high-resolution data existed when it came to tracking flows of goods and services, people and money through our economy. That is changing. These data increasingly exist in companies, whose management systems capture activity in close to real time. They exist through now-ubiquitous  sensor, camera and satellite technology. And they exist in governments, local and central, in the form of administrative data on people, goods and money flows. Increasingly, these data are being put to use to understand the economy.40 In the UK, the Office for National Statistics recently started publishing a range of high frequency economic indicators, based on such sources as administrative data on VAT returns and geospatial data on traffic flows. The Bank has made increasing use of these sorts of data in its own real-time assessment of the economy. Let me give a couple of examples. One topic attracting attention recently has been the economic consequences of a disruptive Brexit.

Patterns in these systems often self-replicate at different resolutions; they are “fractal”. 7 One interesting question is whether economic systems also exhibit self-replicating patterns. If so, this has implications for how we understand and model them. We consider these questions using a sequence of maps. Many of these maps are not new. For example, Philip McCann from the University’s Productivity Insights Network (PIN) has published an excellent book setting out a range of fascinating regional facts and maps. So too have others.8 These maps provide useful context when testing the Tip O’Neill hypothesis and when modelling and managing the economy. To provide the clearest visual guide, these maps are scaled by economic rather than geographic size – so-called cartograms.9 Each region is initially scaled to have the same geographic area and then rescaled in line with economic differences. This means some areas shrink (such as Scotland) while others expand (such as London) even without differences between them. This helps when visualising local differences. (a)  Differences between regions  To fix ideas, Charts 1a and 1b plot a map and an accompanying cartogram of population by region in the UK and, by way of comparison, Germany. It uses a resolution one-level below the national – administrative “regions” in England and each of Scotland, Wales and Northern Ireland. Comparing the map and cartogram suggests the UK has a significant demographic skew towards London and the South-East.
in the third quarter 2009 compared to a deficit of US $ million in 2008. Similarly, owing to favourable performance of the external sector, international reserves have increased to US $ million in 2009 (end-Sept) from US $ million in December 2003. (v)  Equity markets have begun to reverse their large losses and FDI and portfolio flows are returning to Zambia’s financial sector. BIS Review 161/2009  5  (vi)  Zambia’s financial sector remains strong and stable largely due to banks being adequately capitalised, as confirmed by a recent Financial Sector Assessment Programme (FSAP) Survey by the IMF and World Bank. VI. Challenges  The unfavourable effects arising from the recent global financial and economic crises are huge but surmountable. To this end, we need to do more than what we have done in the past. One of the key challenges relates to need to maintain macroeconomic stability. Macroeconomic managers in less developed countries have to be careful not to use the global economic crisis as a reason to slip back to unsustainable macroeconomic policies of the past. In addition, the crisis has brought to the fore, once again, the ever important challenge of accelerating the diversification process. Our reliance on export of primary commodities, copper in the case of Zambia, exposes our countries to external risks such as the ones we are currently experiencing. VII.

What is more, the European payment ecosystem has become extremely reliant on non-European players – today the global card schemes, and tomorrow the Bigtechs – with the result that it now has limited control over the management of personal data. In parallel, the rise of crypto-assets and above all of stablecoins means they could potentially try to replace central bank and commercial bank money, even though they offer none of the same guarantees in terms of liquidity, service continuity and neutrality. In light of this situation, Europe needs to develop a payments strategy. I have often pushed for this over the past two years. Recently, we have made decisive progress thanks to the strong involvement of the ECB and the Commission. We now have to put this into action and “deliver” – this is urgent for the next two years. This strategy notably combines three elements: 2/3  BIS central bankers' speeches  1/ European regulation on stablecoins: on 24 September, the European Commission published its MiCA project, which in our view provides a good basis for reconciling innovation with consumer protection and financial stability. 2/ An acceleration on the European central bank digital currency (CBDC), the “digital euro”. We haven’t yet decided on it, but we need to be ready to decide if it becomes necessary, and as soon as it becomes necessary.
In all cases, and to ensure adequate liquidity, instruments designed last year will continue to be in force throughout this year and, if necessary, they will be extended in order to ensure the proper operation of the financial system, so that it may be able to play its role of channeling credit to the non-financial private sector. 6  BIS Review 41/2009  It is important to highlight that, for mechanisms of monetary policy transmission to work correctly, the money market must be aligned with the MPR. There is no gain in reducing the interest rate if such reduction is not transmitted to the rest of the market. Therefore, when the crisis worsened, the first task was to ease liquidity pressures. The unfolding of the crisis and its consequent effects on inflation forecasts brought the possibility for a monetary easing. Said monetary easing has had a significant extent when compared to our past experiences and to what has been done by other central banks. During the first quarter, the MPR was reduced by 600 base points – from 8.25% to 2.25%. It is important to note once again that our economy has not suffered any of the problems undergone by other economies in their financial systems. Therefore, monetary easing in Chile does not seek to re-establish the operation of credit, as it may happen elsewhere; rather, it has been totally consistent with the inflationary outlook.

In this way, although we will not be spared the effects of the global crisis, we can indeed mitigate their impact. Now, I will start out by presenting a short discussion on the relationship between monetary easing and the origin of the current global crisis. Then, I will discuss the evolution of inflation and output. Next, I will address monetary policy decisions and I will close this presentation with some final remarks. On the origins of the crisis: monetary policy or financial regulation? A lot has been written on the causes of the crisis and, certainly, this is not the time to analyze the myriad of factors which led to it.1 But I certainly do want to talk about the interrelationship  1  Interesting analyses on the origins of the crisis may be found in the articles compiled in section I of Felton and Reinhart (2008). For more recent discussions see Brunnermeier (2009), and Diamond and Rajan (2009). BIS Review 41/2009  1  between the performance of the financial system and the abundant liquidity after the interest rate cut in the United States following the plunge of the high-tech bubble in 2000. Many blame the US expansionary monetary policy as the main cause of the crisis. Such policy would have caused the housing bubble. However, monetary policy easing does not necessarily bring about bubbles in asset prices or even adjustments that may cause such striking effects as the ones we have witnessed in the United States.
Nevertheless, several risks should be highlighted: that of a sudden drop in US consumption in the wake of the problems in the property market; that of a sharp increase in commodity prices; that of a return to volatility on financial markets, after several exceptionally calm years; and, linked to the latter, that of a disorderly adjustment of exchange rates triggered by the build-up of international imbalances. The second concern relates to the extremely rapid growth of monetary and credit aggregates in the euro area. The annual growth rate of M3, which was below 6% in 2004, gradually accelerated and currently exceeds 10%. Loans to the private sector also continue to expand by more than 10%. Structural changes in money and credit demand – linked to financial  BIS Review 92/2007  1  innovation – may partly account for this acceleration. However, these developments must be closely monitored in view of their implications for monetary stability and that of financial systems. During 2004 and 2005, household borrowing was the primary source of credit growth; in 2006, this was replaced by lending to enterprises, in line with the economic recovery and the rise in – often highly leveraged – company buyouts. The strong profits and financial soundness of firms facilitate and sometimes encourage increased borrowing, which is then presented as “optimising” their liability structure. But balance sheets are weakening and difficulties could appear in the event of a turnaround in the business cycle.

These recent initiatives should be pursued in order to expand the poles of competitiveness, attract researchers and companies, and integrate SMEs and startups that do not benefit from the resources available under these innovation drives. In the main, these reforms are currently underway or being examined in our country. It is thus becoming possible to create lasting conditions for stronger and more employment-rich growth. Public finances Despite the partial consolidation seen over the past two years, public finances remain weak and call for great vigilance. Following the reform of the Stability and Growth Pact, France made a number of commitments. These commitments have been made for a reason and the credibility of the efforts undertaken elsewhere on the European stage depends on their respect. France, which is the euro area’s second largest economy in terms of size, naturally aims to play a key role in this area in order to enhance and develop “economic governance”. Come what may, it is in the interest of France’s economy and citizens to consolidate public finances. The role traditionally attributed to public spending and welfare is to contribute to a better allocation of resources in the economy, foster the desired redistribution of income and, if the conditions are in place, help stabilise economic cycles. These three functions are more difficult to realise in a globalised economy that reduces leeway and creates, in practice,  BIS Review 92/2007  5  latent and permanent competition between tax systems and public policies. A number of major imperatives thus emerge.
A certain increase in lending is normal in an economic upswing, when companies need to borrow in order to invest, while households borrow, for example, in order to meet rising house prices. In an economic boom, loan losses are also generally low, while they tend to be higher during a recession. The increased level of indebtedness has also come under discussion. The question has been raised of whether households and companies today borrow to such an extent that this could lead to problems in the banking sector when the economic cycle turns downward. History shows us that the factor which has triggered banking crises in modern times has often been extensive loan losses caused by changes in the macroeconomic environment. This was also the case during the Swedish banking crisis at the beginning of the 1990s. Is the growth in credit worrying? So what is the situation at present? Figures for April show that total lending to the general public is up 7.3% compared with April 1999. The main growth is in household lending, which has risen by 8.8%, while corporate lending has increased by 4.1%.1 A perspective on these figures can be obtained if we consider them in relation to GDP. This gives a measure of whether lending is growing at a faster rate than the economy as a whole, which provides us with an indication of whether imbalances are being built up.

First, the SNB must try – despite volatile risk premiums and interest rate expectations – to keep the targeted three-month Libor as close as possible to the desired goal. Second, with its operations and its choice of instruments, it must contribute to a well-functioning money market. Even though there have been several innovations in the area of monetary policy instruments, the SNB’s options in this complex environment are limited, however. In particular, there is no magic bullet with which central banks could restore the lost confidence among market participants. In dealing with the financial market crisis, therefore, banks and other financial market participants must also try to help restore the proper functioning of markets by implementing measures to shore up confidence. BIS Review 34/2008  1