samchain/econo-pairs-v1 huggingface dataset:
3  BIS Review 113/1999  The first of these criteria, generally known as the “political criterion” calls for a candidate country to have stable institutions which guarantee democracy, the rule of law, human rights, and respect for and the protection of minorities. I shall not comment on this criterion as its purpose and meaning are quite clear to us all. The “economic criterion”, as the second of these criteria is termed, requires the existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the European Union. The economic reasoning which lies behind this criterion is also quite straightforward and requires little elaboration. However, I should like to add that for the accession countries, while it is no doubt a difficult and sometimes painful task, fulfilling this criterion is an essential step towards creating a solid basis for future non-inflationary economic growth. And, finally, there is the third criterion concerning the adoption of the so-called “acquis communautaire”. This requires that a candidate country be able to take on the obligations of EU membership, including the adherence to the aims of political, economic and monetary integration. It is this last point which is of course most relevant to the Eurosystem. EU enlargement and the Eurosystem As I understand it, it has been decided that no new “opt-out” clauses, such as those negotiated by the United Kingdom and Denmark, shall be available to new Member States.

This is in the interest of the countries which have already introduced the euro, but even more so in the interest of new countries entering the euro area. Without having achieved sustainable convergence, the loss of the exchange rate and interest rate instrument could cause costly tensions in the economy at the expense of growth and employment. The determined efforts of Greece to achieve such convergence have to be commended. However, it is too early to reach a firm conclusion. Next year, the European Central Bank (ECB) will produce a convergence report to analyse what has been accomplished. Let me repeat and underline that achieving convergence is not a process which ends with adopting the euro. On the contrary, being a member of the euro area and being able to benefit from the potentially great opportunities that offers call for ongoing adaptation to the new environment and the new rules of the game. It is like in sports: reaching the top is difficult, but staying there is even harder. 1  BIS Review 113/1999  Integrating one or more of the EU Member States which have not previously introduced the euro will be a challenge for the euro area. However, an even greater challenge for Europe as a whole lies ahead. I am referring to the enlargement of the European Union. First, I shall deal with that process in general. Then, I should like to say a few words about how the Eurosystem (i.e.
This is clearly not the case in reality as the US rate is affected by capital flows from the rest of the world which are evidently not easy to “sterilise”. The effectiveness of monetary policy is affected by such influxes. Given that the US interest rate is nevertheless the reference for global financial markets, the reflow of funds produces second- and third-round effects on EMEs and on advanced economies (Chart 9). We are witnessing a paradox: EMEs as a whole are being inundated with short-term capital inflows, and yet they are net capital exporters. We have also failed to understand how these capital flows have increased the liquidity in the financial system and influenced the behaviour of economic agents. For instance, the impact that the pre-crisis low interest rate level had on the propensity of financial institutions to relax credit standards, to increase leverage and to pursue carry trades was underestimated (charts 10, 11, 12). Policy-makers not only ignored it but considered that this had nothing to do with risks to price stability, that it was related to financial stability and had to be addressed through prudential regulation. Another issue which requires further discussion is the role that the financial industry has played in advanced economies. The conventional wisdom is that financial innovation and financial deepening promotes growth. However, the evidence is controversial and it is not clear to what extent the industry has benefited the long-term growth potential of these economies.

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.
However, monetary policy only affects the level of prices with a lag and cannot aim to control it in the short term. Rather, monetary policy needs to be geared to the maintenance of price stability over the medium term, also in order to avoid introducing undue volatility in economic activity. In this respect, the level of long-term interest rates in the euro area, as well as various other indicators of the inflation expectations of economic agents, point to continued confidence throughout 2001 in the ECB's determination to maintain price stability in the medium term. Indeed, there were already some signs in 2001 that medium-term inflation pressures were gradually starting to decline. At the start of the year, M3 growth moderated. This, together with a decline in the growth rates of loans to the private sector, indicated that the risks to price stability from the monetary side were becoming more balanced than they had been in 2000. In addition to this, the quantification of the upward distortions to the official monetary growth figures provided evidence in early 2001 that the growth of M3 appeared to be less pronounced than originally thought. At the same time, the global economy showed some indications of weakness in early 2001, which gradually affected economic activity in the euro area through declining investment and export growth. BIS Review 26/2002  1  As a consequence, real GDP growth in the euro area was expected to moderate.

However, owing to the strong M3 growth in 2001, there is still a lot of liquidity in the economy. We therefore have to monitor monetary dynamics closely in the coming months. The persistence of excess liquidity in the economy could become a concern once the economic recovery in the euro area gathers pace. Turning to economic developments, the latest information has reinforced our expectation that real GDP growth in the euro area will recover in 2002 and that, later in the year, it should again be back in line with potential growth. The recovery should be supported by both domestic and external factors, in an environment in which financial conditions are favourable and where there are no major imbalances in the euro area. However, at the current juncture, some uncertainty still remains regarding the strength of the recovery. As regards price developments, there is no evidence thus far of a significant upward impact on the overall price level from the euro cash changeover. While some shorter-term effects cannot be ruled out, there is reason to believe that the introduction of the euro banknotes and coins will strengthen competition, thereby supporting the maintenance of price stability over the medium term. This notwithstanding, HICP inflation is currently somewhat higher than was expected a few months ago, owing partly to a significant rise in oil prices.
And rather than solve a complex inter-temporal trade-off, monetary policy in practice seems to mimic simple rules of thumb (Taylor (2016)). Some would interpret these simple decision rules as irrational, in the sense of being inconsistent with the Euler condition from standard macro-models. But even the concept of rationally needs careful reconsideration in an environment of radical uncertainty. Rationality can only be defined in relation to the environment in which decisions are made – what some have called ecological rationality (Gigerenzer (2014)). Heuristics can be the ecologically-rational response to radical uncertainty. In ABMs, the behaviour of agents is characterised, not by Euler conditions, but by behavioural rules of thumb. These systems also exhibit radical uncertainty. That means there is a degree of model-consistency in ABMs – heuristics and uncertainty are mutually consistent. In that sense, the behavioural rules embedded in ABMs are neither as irrational, nor as prone to the Lucas critique, as some critics might imply. (c) Non-Normal Behaviour  In many standard models, the equilibrium of the system is both singular and stationary. There is a natural and unique state of rest towards which the model converges following a disturbance. Wicksell’s rocking horse is not a perpetual motion machine and nor does it turn somersaults. While many models of multiple equilibria exist in economics and finance, they tend to occupy the suburbs rather than the city-centre of the profession. In ABMs, the equilibria which emerge are often non-stationary or multiple, sometimes both.

Timothy F Geithner: The current financial challenges – policy and regulatory implications Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Council on Foreign Relations Corporate Conference 2008, New York, 6 March 2008. *  *  *  I am going to talk today about some of the challenges facing the U.S. and financial system. These problems took a long time to build up, and, even with a forceful mix of public policy and action by the private sector, they will take time to resolve. The central questions are: what caused the crisis and what explains its severity? What mix of policy measures will best contain the damage? And what changes to the financial system are likely to produce greater stability and resilience in the future? Origins The origins of this crisis lie in complex interaction of number of forces. Some were the product of market forces. Some were the product of market failures. Some were the result of incentives created by policy and regulation. Some of these were evident at the time, others are apparent only with the benefit of hindsight. Together they produced a substantial financial boom on a global scale. In the five years leading up to the present stress, the world experienced an unusual mix of financial conditions.
The 2018 task force on artificial intelligence led to the publication of a first report, and in turn to the launch of experiments with volunteer players, which shall continue in new forms next year. This work is a first step towards the publication of principles of governance for AI algorithms. The working group on remote customer identification led to a number of regulatory changes this year. We are now supporting ANSSI’s efforts to publish a framework so that these changes can be fully implemented. We have also set up two working groups with players from the crypto-asset sector. The first, which published its report last Wednesday, examines all anti-money laundering methods used by digital asset service providers: it highlights the potential of blockchain technology in transaction tracing, and sets out technical avenues for ensuring that electronic transfers meet the transparency requirements recommended by the FATF. The second aims to promote dialogue between digital asset service providers and banking players, to help cryptoasset entrepreneurs get access to the bank accounts and services that they need. II. The digital revolution in payments I would like to turn now to a subject that is closely linked to Fintechs: payments in the digital era. Innovations in the field of payments are disrupting the traditional split between central bank money and commercial bank money. People are using less and less cash, and therefore less and less central bank money, and more and more contactless payments.

But transmission through the exchange rate channel is uncertain and volatile, as the exchange rate is also an asset price that fluctuates with speculative capital flows and can deviate from equilibrium over extended periods and then correct quite suddenly. Unless the financial system is that much better protected, this process can interact negatively with financial stability, as was the case in Iceland during the financial crisis. From a theoretical standpoint, it is possible to resolve or mitigate the problem facing small countries in this regard in three ways: by joining a currency union, adapting monetary policy to that prevailing in larger economies even though it is not suitable for domestic conditions, or imposing restrictions or other measures that directly reduce non-residents’ profits on carry trade. As has already emerged, such measures are being examined by the Central Bank, and they could constitute part of our arsenal of policy instruments after the capital controls have been lifted. But we mustn’t think that they represent some sort of magic bullet. Such instruments would have adverse side effects and could push international obligations to their limits, particularly if they are designed for maximum efficacy. But experience shows that it could be risky not to have them if they are needed, but we must attempt to conduct other matters so as to ensure that they will be needed as seldom as possible.
Coalition forces assumed control of the whole territory, and on 7 July 2003 the head of the Coalition Provisional Authority, Paul Bremer, announced that a new Iraqi dinar would be printed and exchanged for the two existing currencies at a rate that implied that one Swiss dinar was worth 150 Saddam dinars. The exchange was to take place over the period 15 October to 15 January. It is now virtually complete. The new dinars, like the Swiss, were printed by De la Rue in a very short space of time using plants in Britain and several other countries, and were flown into Iraq on 22 flights using Boeing 747 and other aeroplanes. The fact that the populations of both North and South Iraq have been prepared to exchange their old notes for new dinars reflects the confidence which they have in the future of the institutions backing the new Iraqi dinar. The 150 parity is barely half the rate the Swiss dinar reached at its peak (see Chart 6). 15  10  The minutes are archived on the KRG web site www.krg.org/news.

14  Sources for these data include the United Nations (from the oil-for-Food program) and the Central Bank of Iraq. 8  BIS Review 5/2004  clearly a consequence of the evolution of the actual and expected money supplies in the two territories. Given the monetary and fiscal policies pursued by the Saddam regime, the rise of the Swiss dinar against the Saddam dinar is, perhaps, understandable. But what is less obvious is the path of the Swiss dinar against the US dollar. Chart 4 shows the Swiss dinar-dollar exchange rate from 1997 onwards. Chart 4: The Swiss Dinar/Dollar exchange rate, Jul 1997-Oct 2003 0  Swiss $  5 10 Swiss $  15 20 25 30 35 Jul-97  Jul-98  Jul-99  Jul-00  Jul-01  Jul-02  Jul-03  Source: United Nations, Central Bank of Iraq  After fluctuating in the early 1990s, the Swiss dinar rose sharply against the US dollar from the middle of 2002 as the prospect of an end to the Saddam regime increased. It rose from around 18 to the dollar in May 2002 to about 6 to the dollar by the beginning of May 2003 when the war ended. That appreciation reflected expectations about (i) the durability of the political and military separation of Kurdish from Saddam-controlled Iraq and (ii) the likelihood that a new institution would be established governing monetary policy in Iraq as a whole that would retrospectively back the value of the Swiss dinar.
Today we help promote financial literacy through a video competition in partnership with the Puerto Rican Bankers Association. Our banking supervisors work to strengthen the financial system so it can readily supply credit to families and businesses, while our research economists monitor and analyze local economic conditions. This analysis – along with similar analyses from other regions across our nation – feeds into the decisions the Federal Reserve makes on monetary policy. In support of this work, I and other senior officials have traveled to Puerto Rico a number of times in recent years and met with a wide range of stakeholders, including university officials, students, business leaders, entrepreneurs, bankers and government officials. What we learn during these engagements helps to shape our understanding of the Puerto Rican economy and our efforts to support it. I have seen numerous examples of expansion and growth. This gives me confidence that Puerto Rico has the capability to be an economic success story. Nevertheless, these local engagements have also confirmed to me that conditions are not what we want them to be – in particular, growth and expansion are not happening broadly enough. The task of putting the Island on a path of robust, sustainable and inclusive growth remains a work in progress. During my visit here in March 2011, a number of business and community leaders expressed their concern that the economy had loss competitiveness. These local leaders asked if we would look at what might be holding back growth on the Island.

In the EU countries that are not using the euro, the effects from monetary conditions in the euro area led to improving macroeconomic environment, loosening financing conditions, and high bank liquidity. That stimulated lending and, in turn, the increase in residential property prices. However, these developments also increased cyclical risks. The Bulgarian National Bank conducted research into Bulgaria’s financial cycle. Our findings showed that we are currently in an upward phase of cyclical risk accumulation. Hence, we activated and then raised the rate of the countercyclical capital buffer. We have so far taken two decisions. In 2018, we set the countercyclical capital buffer rate applicable to credit risk exposures in Bulgaria at 0.5%, with effect from October 1 2019. In early 2019 we raised the rate to 1.0%, with effect from April 1 2020. The rate is applied to the overall credit stock of banks and not to the volume of newly issued loans. We announced that we could increase the rate to a higher level earlier if credit growth significantly accelerates. Our decisions were taken despite the fact that the standard metric of how the credit-to-GDP ratio deviates from its long-term trend remained deep in negative territory. Furthermore, we strengthened the macroprudential powers of the Bulgarian National Bank. The key element here was the introduction into Bulgarian law of a framework of borrower-based measures – requirements such as loan-to-value (LTV) and loan-to-income (LTI) – in addition to the existing capital-based measures.
The required return on investment is reduced at a lower interest rate at the same time as saving is less profitable. ii. Interest rate changes also have an income effect through interest income and interest expenditure on existing assets and liabilities. iii. Interest rate changes also affect share prices and real estate prices – lower interest rates increase demand for shares and properties and prices increase. An interest rate reduction also affects household wealth through higher share and property prices which in turn affect consumption decisions. The interest rate channel therefore affects demand for goods and services and thus the output gap with some time lag through many complicated mechanisms. Changes in the use of resources or the output gap then affect inflation in turn, with some time lag. The impact of changes in the instrumental rate on demand and inflation may also be affected by the lending rate set by the banks. The channel that is mediated by the behaviour of the banks can be generally referred to as the credit channel. Higher interest rates may, for instance, reduce the willingness of the general public to keep funds deposited in current accounts, which have a very low return. Deposits have a very low financing cost for the banks and if they have to finance an increased proportion of their lending in another way, the banks may compensate for this by a higher lending rate. 2 However, it is uncertain how the behaviour of the banks affects the impact of monetary policy.

These indicators clearly have an important bearing on macro-economic health: among workers whose disposable incomes have fallen materially below their pre-crisis levels; among savers, the rates of return on whose assets have fallen materially below their precrisis levels and are near-zero in inflation-adjusted terms; and among companies, whose underlying efficiency has flat-lined since the crisis. These trends are also closely linked. Weak productivity has constrained UK companies’ ability to pay higher wages, such that productivity and real wages have fallen in lockstep since 2008 (Chart 3). And this combination of a weak supply side and weak pricing pressures has in turn generated the need for low or negative real interest rates. To give these developments some context, consider a simple index of real wages, real interest rates and productivity growth. Given their recent trends, and with an eye to semantic symmetry, let’s call this an “agony index”. Charts 4 and 5 plot this agony index from 1970 and back to 1870. The agony index is currently at painfully low levels.5 It has been around 5 percentage points below its 1970–2014 average since 2008. Such an extended period of agony is virtually unprecedented going back to the late 1800s, with the exception of the aftermath of the World Wars and the early 1970s. So far, then, so bad. On this evidence, the UK economy is as weak as at any time in the recent or distant past. It is firmly on the back foot.