samchain/econo-pairs-v1 huggingface dataset:
The forthcoming NGFS work should therefore also focus on shorterterm horizons (2030, and not only 2050) as the transition to a low-carbon economy may be less linear than anticipated, with tipping points accelerating the transition in a disorderly way. [Slide] We generally need to better understand the long-term trade-off, in terms of GDP, between transition and physical risks and the cost of delayed action. The chart breaks down the GDP losses under three scenarios into the costs of transition and physical damages. Under the “Paris Agreement” scenario, GDP would be 5% lower in 2060 and around 7% lower in 2100, and most of this reduction can be attributed to transition policies. Under the two “Too-little too-late” scenarios, the transition costs are limited, but by the end of the century the impact of physical risks becomes much larger, leading to overall losses that could range between at least 10 and 20% of world GDP level. From an economic and rational standpoint, the prescription is clear-cut: an orderly transition would require a governmental forward-looking guidance, sending long-term signals and anchoring credible but ambitious commitments. This “climate forward guidance” should include an appropriate pricing of carbon; and as long as we don’t have such global pricing, a carbon border adjustment mechanism (CBAM), as recently put forth by the EU in order to prevent carbon leakage is appropriate. We all know how politically sensitive these issues are, domestically as well as internationally.

Ultimately we needinternationally harmonised disclosure frameworks – at least a basic common ground on which jurisdictions can further elaborate. To this end, interoperability of standards will be key, and the coordination between the EFRAG and the IFRS Foundation, should be the cornerstone of a successful globalisation of non-financial reporting standards. On financial opportunities (let me turn now to the lower part of the axis), the market momentum 1/4  BIS central bankers' speeches  has been impressive this year again. More than half a trillion USD of green bonds will be issued this year, which is an all-time high, with record debut for the EUR 12 bn NextGeneration EU green bond. Inflows into sustainable funds represented more than USD 262bn in the first half of this year, close to half of the overall inflows (USD 545bn) over the same period. On the horizontal axis, which brings together our missions as a Central bank, we collectively achieved a major breakthrough last July with the conclusion of the ECB monetary policy strategy 2 The review under Christine Lagarde’s leadership. The Banque de France contributed decisively. ECB is pioneer in having decided an ambitious action plan by 2024, including the three following steps: (1) make economic projections, and therefore model.
When it was decided to raise the policy rate on December 21, it was known that inflation had slowed down to considerably below the midyear forecast rate. Inflation was mainly brought down by lower energy prices, the impact of the appreciation of the króna since the middle of the year, less-thanexpected wage drift and a slowdown in house price inflation. Domestic demand in Q3 was broadly in line with the Central Bank’s November forecast. It was also known that the current account deficit was wider than expected in Q3 and would significantly overshoot the forecast for the year as a whole. No indications of easing labour market pressures could be seen. Unemployment was negligible and there was a large influx of foreign labour. Despite lower inflation than in the Bank’s July forecast, there was still no sign that the target would be attained within two years if the effect of indirect tax cuts on headline CPI in the first half of 2007 was ignored. Furthermore, the wide current account deficit and tight labour market aroused suspicions that pressures in the economy were underestimated, and thereby inflationary pressures as well. As mentioned earlier, policy rate hikes primarily impact the exchange rate. The króna appreciated substantially until near the end of 2005. By then it was considerably stronger than was compatible with external balance in the economy, as the Central Bank had explained in detail, among other things in its December Monetary Bulletin that year. So it was not surprising that the króna depreciated.

As I mentioned earlier, the Central Bank left its policy rate unchanged on the last interest rate decision date, February 8. In December it raised the rate to 14.25%. This was the eighteenth hike since May 2004; prior to that, the policy rate had been held at 5.3% for more than a year. The Central Bank noted that its December hike seemed to come as a surprise. The introduction to Monetary Bulletin, which was published on November 2, stated that a reduction in the policy interest rate was still not in sight, in spite of substantially brighter inflation prospects. On the contrary, it was impossible to rule out a further policy rate hike in order to attain the inflation target within an acceptable timeframe, and the analysis presented then implied that there were still grounds for tightening the monetary stance further. However, the Board of Governors had decided to postpone such a measure for the time being. The next interest rate decision, to be announced on December 21, 2006, would be based on the analysis in the November Monetary Bulletin and additional data that became available by that time. The Chairman of the Board of Governors underlined this message from Monetary Bulletin in a speech a few days later when he described the decision to leave the policy rate unchanged on November 2 as a deferral of an increase rather than the end of the tightening of the stance.
the postcrisis response of regulation coincided with the greater use of quantitative easing. But it is nonetheless helpful to separate them analytically. A decade ago there would have been reason to think that the monetary policy need for increased central bank balance sheets would be shorter term, while the financial stability See “The central bank balance sheet as a policy tool: past, present and future”, by Andrew Bailey, Jonathan Bridges, Richard Harrison, Josh Jones and Aakash Mankodi. Available here. 1  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  demand would be permanent. That distinction still stands, but the structural drivers of low equilibrium interest rates suggest the use of central bank balance sheets for monetary policy will be more long-lived than had been anticipated. Expansion of central bank balance sheets in response to Covid  Turning to the more recent period, the financial stability and monetary policy drivers of central bank balance sheet expansion were again deeply intertwined. Central banks faced an incipient financial stability shock together with a need for monetary policy to respond to an unprecedented – in scale and speed – economic downturn. But the financial stability emergency differed from previous such events. The problem originated not primarily in the banking system, but in the non-bank sector – among funds, traders and corporates themselves. Central banks activated their traditional tools to inject liquidity into the banks via repo operations, and these played an important part in stabilising conditions.

Where that requires larger purchases of a broader array of assets, it inevitably raises risk management questions for central banks. So, I think the Covid crisis has demonstrated the need to ensure central banks have as many tools as possible in their box, of which expanded purchases of private sector assets is one, but given the issues it raises I would emphasise state contingency here in terms of when some tools may be more appropriate or necessary, given the severity or particular nature of the circumstances at the time. The MPC has considered its prospective approach to QE unwind in recent years, and in June 2018 set out that the balance sheet would be unwound at a gradual and predictable pace, allowing reserves to fall back to a level demanded by banks through their participation in regular repo operations, and once the Bank Rate had risen to around 1.5%, thus creating more headroom for the future use of Bank Rate both up and down. The MPC keeps this approach under review, though I should make clear that it does not seem like an imminent issue in current conditions. But we are looking at the next decade at this conference, so who knows what will happen. We should keep the options to use all our tools as open as possible, so I would conclude that the appropriate policy mix going forwards over a decade may be more nuanced than  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  previously thought.
While the risk of a pronounced slowdown of the US economy, with negative repercussions on the world economy, cannot be ruled out, such a scenario appears unlikely at present. However, a major challenge for the US authorities over the next few months is engineering a “soft landing” of the US economy. The Japanese economy now shows clearer signs that the protracted weakness of the last few years could come to an end. An economic consolidation and a resumption of capital flows to crisis-hit emerging market economies, especially in Asia, also contribute to this favourable outlook. Against this positive background, the challenge now is to ensure that the current recovery in the euro area becomes a period of prolonged non-inflationary and employment-generating growth. I will  1  BIS Review 116/1999  elaborate on the possible contribution of the ECB and the Eurosystem, but also on the limitations thereof, pointing to the necessary contributions of other policymakers. Looking back at the past ten months, I would like to recall that the introduction of the euro took place in an environment of price stability that only few observers would have predicted some years ago. This was the result of a process of economic convergence, in the course of which European inflation rates were reduced significantly. This development is very encouraging, since theoretical arguments and empirical evidence over several decades suggest that high and variable rates of inflation are detrimental to growth and employment in the long term.

2) In recent months, as a prior step to the SSM taking over supervisory competences, an assessment has been made of significant institutions, the aim of which is to enhance transparency in respect of their position and to reinforce their solvency. The outcome of this exercise will help the SSM to assume its functions with accurate knowledge of the actual situation of the banks it will directly supervise. The exercise is now close to completion and its results will be made known before the end of this month. It comprises two phases: an asset quality review and a stress test, on which the Banco de España has been working intensely for several months in cooperation with the ECB. The first phase, namely the assessment of the quality of the assets associated with credit and market risk, consisted of verifying the accuracy of the figures and of reviewing asset and collateral values, along with the related provisions (with the collaboration of audit firms). On the basis of the results obtained, exposures have been classified as standard or nonperforming, based on the level of risk, with the ECB imposing painstaking quality control of the results of the review. A stress test is an analysis of credit institutions‘ capacity to absorb losses, evaluating their resilience in different scenarios. The exercise indicates how much capital might be needed were risks to materialise, and it helps highlight areas where supervisory action might be necessary.
At present - with continued low interest rates abroad and a close link between domestic interest rates and the krone - a tighter monetary policy would restrain credit demand primarily because job security would be reduced as a result of a stronger krone. House prices and developments in household credit influence consumption and housing investment. We seek to take account of these indirect effects in interest-rate setting. A turnaround has occurred in the Norwegian economy. The economy has experienced a soft landing after the long period of high cost inflation in Norway and sluggish external activity. •  Output has returned to trend and is now showing a marked rise. •  Employment has returned to trend and is rising. •  Unemployment is at the 1996-level and is equal to the average for the 1990s. •  Wage growth is broadly in line with a level that is consistent with the inflation target given normal productivity growth. •  Overall credit growth is balanced. Credit is expanding approximately in line with trend growth in nominal GDP. •  Labour costs in Norway relative to our trading partners are now broadly in line with a long-term average. •  The nominal krone exchange rate is on a par with the average for the 1990s. •  The interest rate level is close to the level prevailing among our trading partners. •  Inflation expectations are approximately the same as the target.

(iii) For its part, the Governing Council completed the list of committees which will assist in the work of the European System of Central Banks (ESCB). In addition to the eleven ESCB Committees agreed upon at the meeting in July, the Governing Council decided to establish an International Relations Committee and a Budget Committee. The latter was set up in order to provide transparency to the shareholders of the ECB - the national central banks - on matters relating to the budget of the ECB. (iv) Finally, the Governing Council endorsed the draft Headquarters Agreement between the German Federal Government and the ECB, which will be signed here in Frankfurt on 18 September 1998. A number of decisions were also taken with regard to various aspects of the preparatory work for Stage Three. (a) Exchange rate policy co-operation between the euro area and other EU countries The General Council endorsed the text of an Agreement between the ECB and the non-euro area national central banks, laying down the operating procedures for an exchange rate mechanism in Stage Three (the so-called ERM II). You will recall that the European Council in Amsterdam in June last year agreed to set up an exchange rate mechanism in Stage Three to replace the present European Monetary System (EMS). For this reason, the EMI had, on behalf of the ECB, prepared a draft Central Bank Agreement to replace the current exchange rate mechanism (ERM I, if you like) by a new one in Stage Three.
Money laundering and terrorist financing is often cross-border in nature. Hence we have established effective channels to facilitate international co-operation and exchange of information. This will continue to be an important part of our overall AML/CFT regime. Enhancing Singapore’s reputation as a clean and trusted financial centre must be a collaborative effort by all stakeholders. It is neither realistic nor desirable to expect MAS to police every single transaction or activity in our financial markets. The responsibility lies with every FI to instil high standards of risk management and proper conduct at all levels. Boards and senior management in particular must send a clear signal that profits do not come before values and ethics. There can be no room for flexibility in ethical standards. Our financial centre must continue to be built on a bedrock of trust and integrity. The financial centre: dynamic and purposeful Next, building a financial centre that is dynamic and purposeful. The financial sector grew by 5.3% last year, compared to overall GDP growth of 2.0%. In fact, since the recovery from the global financial crisis, financial sector growth has consistently outpaced that of the overall economy. But this year, financial services and overall economy growth will be closer. Notwithstanding the slowdown in growth, the financial sector has continued to build on its strengths – strengthening infrastructure, deepening markets, and enhancing connectivity. Let me highlight some of the new initiatives we are embarking on. In asset management, we are building depth and breadth.

The economy is more or less at full employment, consumption has rebounded, and household income growth has recovered to near pre-crisis rates. The problem with the US recovery, at least from the perspective of Singapore and the region, is not its pace of growth but its composition. US GDP growth is not generating as much trade as previously, with persistent weaknesses in business investment, including in IT. This has implications for export growth in Asia and in Singapore. US consumption generates only around two-thirds the import demand that US investment does. So for Asia and Singapore, we need to see a recovery in US investment. BIS central bankers’ speeches  1  China’s growth should slow but we do not expect a “hard landing”. The official target of 6.5% is quite attainable on the back of fiscal stimulus and continued credit expansion. In fact, the risk is not of too low a growth rate but a growth rate that is achieved by adding to the underlying vulnerabilities in the Chinese economy: high and rising levels of corporate debt, industrial over-capacity and deteriorating asset quality in the banking system. Changes in the composition of China’s growth will continue to have an impact on Asia and Singapore. The rebalancing of demand away from investment and towards consumption has weighed on the region’s exports of commodities and capital goods. But over time, there are opportunities for countries which re-orientate the structure of their exports to tap on China’s burgeoning demand for consumer goods and services.
The Eurosystem has provided – and is still providing – support to those national banking systems which face liquidity needs. I would like to underline that the key precondition for such a support is that the country concerned sticks to the EU/IMF adjustment programme and are on track. In other words, the responsibility for ensuring the conditions for the Eurosystem to support the banking system of the countries under stress is with the authorities of the countries themselves. There should be no doubt about it. 5  For further details, see Trichet, J-C. (2009). “The ECB’s enhanced credit support”, address at the University of Munich, http://www.ecb.europa.eu/press/key/date/2009/html/sp090713.en.html. 4  BIS central bankers’ speeches  The support provided to the banking system has been substantial. It is reflected in financing conditions at the euro area level, which have become more favourable of late, amid an ongoing gradual normalisation. Recent euro area bank lending surveys show signs of improvement in credit conditions compared with the peaks recorded during the apex of the financial crisis. While in most euro area Member States we have seen broadly unchanged or slightly loosened credit standards over the past few quarters, in a few others the bank lending surveys point to constraints remaining in the supply of bank loans to firms and households.

These dynamics are captured in the simple specification  where  indexes time,  are iid normal shocks and  is the indicator  function taking value 1 when and value otherwise. As reputational concerns disappear, the term goes to zero, leaving simple autoregressive dynamics. But with reputational externalities, productivity shocks become amplified by the credit cycle: a high realisation of in period could push the macro state above the risky policy threshold, at which point the dynamics of begin also to shape the real economy. The distribution of is assumed to have a higher mean and variance than to simulate the effects of the credit boom. In particular, we constrain the distribution of relative to such that expected risk-adjusted fundamentals are constant over time. 10 So we have, in effect, a regime-switching model. When banks play safe strategies, fundamentals are relatively stable. When banks risk up, they create a temporary improvement in expected fundamentals at the cost of greater volatility. This dynamic specification has some interesting properties. First, even small shocks can have disproportionately large effects on fundamentals depending on the initial conditions. In particular, if fundamentals happen to be close to the switching threshold, a further positive shock will lead all firms to coordinate on the high risk-taking strategy. That drives up both the expected value of fundamentals and its volatility. This generates a form of path dependence. Second, credit cycles are endogenous in this framework. As firms coordinate on high risk strategies, this drives up the expected value of fundamentals.
Because of this, during the first two weeks of September, concern about LongTerm Capital was a widespread topic of conversation in financial markets. It is a traditional and essential role for the President and senior officers of the New York Fed to be talking to, and receiving calls from, market participants regarding significant developments and potential dislocations. In fact, the partners at Long-Term Capital called me early in September to notify me of their difficulties and their discussion with investment houses about plans to raise new capital. By Friday, September 18, with the efforts to raise new capital still unsuccessful and with an increasing number of people now aware of Long-Term’s plight because of the efforts to bring in new investors - events seemed to come to a head. With market conditions particularly unsettled that day, I made a series of calls to senior Wall Street officials to discuss overall market conditions. Let me take a moment to put those calls in context. One important objective of the Federal Reserve is to assure financial stability. Particularly in times of stress, it is essential that the Federal Reserve continue to take the pulse of the market. One way to do that is through candid and open communication with key market participants. Everyone I spoke to that day volunteered concern about the serious effect the deteriorating situation of Long-Term could have on world markets.

There are several ways that the problems of Long-Term Capital could have been transmitted to cause more widespread financial troubles. Had Long-Term Capital been suddenly put into default, its counterparties would have immediately “closed-out” their positions. If counterparties would have been able to close-out their positions at existing market prices, losses, if any, would have been minimal. However, if many firms had rushed to close-out hundreds of billions of dollars in transactions simultaneously, they would have been unable to liquidate collateral or establish offsetting positions at the previously-existing prices. Markets would have moved sharply and losses would have been exaggerated. Several billion dollars of losses might have been experienced by some of Long-Term Capital’s more than 75 counterparties. These direct effects on Long-Term Capital’s counterparties were not our principal concern. While these losses would have been considerable, and would certainly have adversely affected the firms experiencing them, this was not, in itself, a sufficient reason for us to become involved. Two factors influenced our involvement. First, in the rush of Long-Term Capital’s counterparties to close-out their positions, other market participants - investors who had no dealings with Long-Term Capital - would have been affected as well. Second, as losses spread to other market participants and Long-Term Capital’s counterparties, this would lead to tremendous uncertainty about how far prices would move.