samchain/econo-pairs-v1 huggingface dataset:
Now that I am already way out on a limb, I should emphasize that my remarks reflect my own views and not necessarily those of the Federal Open Market Committee or anyone else in the Federal Reserve System. As a starting point, it’s useful to travel back in time to the 1980s and 1990s, when inflation targeting was introduced. The problem at the time was high and variable inflation that contributed to macroeconomic instability and unmoored inflation expectations, which in turn fueled high and variable inflation. To break this vicious cycle, numerous central banks instituted inflation targeting, or variants thereof, with a focus on bringing inflation down to a low level and fostering the establishment of stable, well-anchored inflation expectations. This strategy worked extraordinarily well in the decade preceding the global financial crisis, as central banks were able to achieve remarkably low and stable inflation, leading to a positive feedback loop between low inflation and well-anchored inflation expectations. Today, we face an altogether different set of problems stemming from a very low neutral interest rate—that is, the short-term real interest rate consistent with an economy operating at its potential alongside low and stable inflation. Ironically, the problem we need to solve these days is the risk of inflation that is persistently too low, rather than too high. Today’s low neutral interest rates reflect the culmination of trends extending back 25 years.

This shortfall of monetary accommodation would result in less desirable economic outcomes during the recession and recovery. In particular, inflation would typically undershoot its desired target during these episodes. The persistence of belowtarget inflation rates in many advanced economies over the past decade is a testament to this dynamic. As a result of the inherent asymmetry introduced by the lower bound on interest rates, an inflation-targeting central bank could experience inflation that is below target, once we consider the average inflation rate over periods when policy is constrained and those when it is not. With inflation on average below the target level, inflation expectations will likely slip below the target rate as well.5 A simple example helps illustrate this problem. Say that 80 percent of the time, the lower bound on interest rates does not constrain policy and the central bank aims for a 2 percent target inflation rate. During these “good” times, an inflation-targeting central bank aims to keep inflation near 2 percent. But, 20 percent of the time, the economy falls into a recession that’s severe enough that the lower bound constrains policy. Assume that during these periods, inflation averages only 1 percent. So, 80 percent of the time inflation averages 2 percent and 20 percent of the time inflation averages 1 percent. The resulting average rate of inflation is about 1.8 percent. As a consequence, inflation expectations are likely to become anchored at the long-run average of 1.8 percent, below the desired 2 percent target. But, that’s not the end of the story.
10  I also believe that the policy rate is an inappropriate instrument for handling problems relating to rising housing prices and indebtedness. There are several other, more appropriate instruments, for example loan-to-value ceilings, limiting tax deductions for mortgages, property taxes and so on. Extensive research has also shown that the costs to the real economy will be unreasonably high if one attempts to reduce housing prices with the help of the policy rate. In addition, there are no signs that Swedish housing prices constitute a bubble, that is that they are incompatible with fundamental factors such as high demand and low supply as a result of limited construction. It can also be demonstrated that the current level of indebtedness is not a problem in relation to the household’s ability to service their debts and to their assets. For a more detailed discussion, see Svensson (2010b, c). 6  BIS central bankers’ speeches  balanced in the initial position, for example if it appears that both inflation and resource utilisation will be too low, then increased growth is not a reason to tighten monetary policy. 11 Growth can lead to bottlenecks and a shortage of labour in some sectors. Are these reasons for increasing the repo rate? Yes, but only if they increase the inflation forecast. Circumstances such as bottlenecks and shortages are important when it comes to assessing the effects on wages and inflationary pressures, and to forecasting wages and inflation.

Strotz, R.H. (1955–56), “Myopia and inconsistency in dynamic utility maximization”, Review of Economic Studies 23, 165–180. Svensson, Lars E.O. (2005), “Monetary Policy with Judgment: Forecast Targeting”, International Journal of Central Banking 1(1), 1–54 Svensson, Lars E.O. (2010a), “Inflation Targeting”, published in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3, Elsevier. Svensson, Lars E. O. (2010b) “Some problems with Swedish monetary policy and possible solutions” speech held in Stockholm, 2010-11-24. Svensson, Lars E.O. (2010c), “Monetary policy after the financial crisis”, speech held in Tokyo, 2010-09-17. Svensson, Lars E.O. (2010d), “Why a lower repo-rate path? ", speech held at Umeå University, 2010-02-24. Svensson, Lars E.O., and Robert J. Tetlow (2005), “Optimal Policy Projections”, International Journal of Central Banking 1(3), 177–207 Sveriges Riksbank, (2010), Monetary policy in Sweden. Sveriges Riksbank (2011a), Monetary Policy Report: February 2011. Sveriges Riksbank (2011b), “Minutes of the monetary policy meeting”, no. 1, 2011-02-14. 10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches
I look forward to the productive and engaging discussions during this conference, and wish you a pleasant stay in Kuala Lumpur. I shall now invite the ISI President, Professor Vijay Nair to deliver his Opening Remarks. 2  BIS central bankers’ speeches

Similarly, the Appointed Overseas Office framework which was expanded in 2017 has facilitated wider access to the Malaysian market. The launch of the AOO pilot programme in August this year has further enhanced market liquidity and reduced transaction costs for larger volume transactions by allowing inter-AOO squaring of positions for more efficient price discovery. With 168 AOOs from 22 banking groups operating in 36 countries, market access to the onshore Malaysian markets continues to grow. To meet the need for continuous communications with investors, market participants and intermediaries alike, the Bank developed dedicated webpages for investors interested in the developments of the Malaysian financial market. There are continuous updates on what is new in our markets, and important updates on Foreign Exchange Administration rules that market participants may use as a point of reference in their ringgit dealings. Many of these initiatives focus on increasing efficiency, access and transparency. However, the reality is that markets will always be imperfect. In the 1970s through to the 1990s, we were told that financial markets can be relied upon to be efficient, that prices will reflect all available public information and hence appropriately reflect the fundamentals of an instrument or asset. Regulators were asked to leave markets alone. Liberalisation and deregulation were the two key themes and policy push on emerging markets that would enable the development of liquid financial markets. Then in the 1990s, the Asian Financial Crisis happened. Together with liberalisation and deregulation came excessive speculation and destabilising capital flows.
Meanwhile, in the United States, the subprime mortgage crisis had already erupted in mid 2007, and by March 2008 an important financial institution, Bear Stearns, had collapsed. An important point of this preamble of the facts of September 2008 is that the string of events I just mentioned had no significant effect on economic expectations, nor did it change the mean of expected growth or increase uncertainty. This, despite the fact that the Bear Stearns bankruptcy was a very significant occurrence for the international financial market. Actually, the volatility of stock markets went up a rung in mid-2007, but was pretty mild if compared with September 2008 (Figure 4). This stock volatility index (VIX), which is normally used as a  4  BIS Review 76/2009  good indicator of uncertainty, 5 shows how it increased several times during the peak of the crisis in September and October of last year. The latest figures show uncertainty declining, although it remains high. Thus, according to market consensus, world growth for 2008-2009 posted no significant changes between March and September of 2008 (Figure 5). The situation in Chile did not differ much (Figure 6). During the whole of 2007, growth projections for 2008 fluctuated around 5 percent, even after the eruption of the housing crisis in the United States. At the time of Bear Stearns’ bankruptcy there had been some adjustment in expected growth for the year, but in September there was even a slight correction upwards. The Bank’s forecasts were similar.

Figure 14  Change in growth projections for 2009 and 2010 (month-on-month variation of median projection, percentage points) 2009  2010  0.5  0.5  0.5  0.5  0.0  0.0  0.0  0.0  -0.5  -0.5 -0.5  -0.5  -1.0  -1.0 -1.0  -1.0  -1.5  -1.5 -1.5  -1.5  -2.0  -2.0 -2.0  -2.0  -2.5  Feb.08  Jul.08  Dec.08  -2.5 -2.5  May.09  Feb.09  Mar.09  Apr.09  -2.5  May.09  United States  Japan  Eurozone  Latin America  Chile  Mexico  Brazil  Eastern Europe  Source: Consensus Forecasts. 14  BIS Review 76/2009
Monetary policy The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. It is just as important to avoid an inflation rate that is too low as it is to avoid an inflation rate that is too high. The inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. The inflation target also provides a framework for monetary policy’s contribution to stabilising output and employment. The economy grows thanks to increases in the supply of labour and capital and technological progress. Average growth over time is referred to as trend growth. Owing to shocks to the economy, actual growth fluctuates around trend growth. The chart shows actual mainland GDP growth and trend GDP growth. BIS Review 16/2004  3  Normally, Norges Bank sets the interest rate with a view to achieving inflation of 2½ per cent two years ahead. A two-year horizon is applied because it takes approximately two years for an interest rate change to have a full impact. A flexible exchange rate Norway is a small open economy with a floating exchange rate. The Norwegian krone does not stand out as particularly volatile. On the contrary, in countries like Sweden, the UK, Switzerland, Australia, Canada and New Zealand, the exchange rate fluctuates just as much - or more - than the Norwegian krone. There is a cost involved for businesses in hedging against fluctuations in the krone.

The key interest rate has been reduced by 5¼ percentage points and is now approximately the same as among our trading partners. The krone has depreciated over the past year, and is in line with the average for the 1990s. Monetary policy is expansionary. This is reflected in low after-tax real interest rates as shown in the chart. The low interest rate level has reduced household net interest expenses. This has increased household purchasing power considerably. Household demand will probably be the most important driving force in the Norwegian economy in the period ahead. Private consumption has a considerable impact on overall demand and activity and accounts for 60 per cent of mainland GDP. Low inflation and reduced interest expenses will support strong growth in household real income. Even with a moderate wage settlement, real income growth may reach about 5%. In addition, improved labour market conditions will strengthen job security and lead to expectations of higher income growth. Against the background of high real income growth, improved job security and expectations of continued low interest rates ahead, household consumption is expected to exhibit strong growth. Growth in private consumption is projected at 5¼% between 2003 and 2004. Given this path, consumption will grow at a pace that is broadly in line with real income, with little change in the saving ratio. After falling last year, house prices edged up in autumn. At the end of 2003, house price inflation was high.
This will result in unsound investments and wider fluctuations in the economy. It is also important to avoid deflation, a fall in prices, because this often accompanies and can amplify a downturn. Low and stable inflation provides households and enterprises with a clear indication of changes in relative prices. This makes it easier to make the right decisions and contributes to price stability in financial and property markets. This is the best contribution monetary policy can make to economic growth and stability. A number of studies have looked at the effects of high inflation on the real economy, see for example references in Qvigstad and Røisland (2000). We have had four periods of very high inflation over the past 100 years: during the two world wars; the Korean War and a 15-year period from the first half of the 1970s to the second half of the 1980s. In Norway, very high inflation is a wartime phenomenon and a 1970s and 1980s phenomenon. Substantial real economic losses and financial instability have followed in its wake. Inflation was a costly affair. BIS Review 59/2002  1  The fourth period of high inflation was unlike the three previous periods. In the 1970s and 1980s, inflation accelerated gradually. It was not as high as during the two world wars, but it took a long time for the level to fall. The fixed exchange rate system of the post-war period, the Bretton Woods system, broke down in 1971.

Denis Beau: The Euro area sovereign debt markets in the crisis role and impact on financial stability perspectives Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Risk Live 2021, 7 June 2021. * * * The demand and supply environment in which European sovereign debt markets operate has changed over the last years and is still changing: 1. Firstly, liquidity in the financial system has increased, both in terms of excess reserves held by commercial banks and deposits held by the non-financial sector, notably corporates, whose considerable increase in gross debt has so far largely been offset by a similar rise of liquid assets on aggregate; 2. Secondly, central banks have strengthened their presence in the secondary sovereign debt market. This is a common and global feature. The Eurosystem for instance, has reinforced its accommodative policy stance notably by stepping up its asset purchases of public sector securities under the pandemic emergency purchase programme (PEPP) while continuing those under the asset purchase programme (APP). This implies that a large proportion of the stock of some governments’ debt -for the major currencies- is currently held by central banks; 3. A third obvious factor lies in the significant increase in sovereign debt issuances since last year, as European countries implemented substantial fiscal measures to cushion the economic impact of the Covid crisis and foster a subsequent recovery. All in all, euro area governments issued close to EUR 1 trillion in net debt in 2020.
First, the financial crisis has shown that a large, highly developed and internationally integrated banking industry means risks as well as growth opportunities. In particular, the crisis clearly demonstrated that some individual banks are so important for the economy that they have to be rescued by the state in the event of a crisis. This is the “too big to fail” (TBTF) issue. Because of the de facto state guarantee associated with the TBTF issue, the borrowing costs of these kinds of bank are implicitly subsidised. As a result, competition is distorted in favour of these banks. In particular, however, the implicit state guarantee creates incentives to take on excessive risk. In Switzerland, this problem was particularly acute before the financial crisis. As is well known, the global expansion and exposure of the big banks in the area of investment banking meant that, in autumn 2008, UBS found itself in a precarious situation. Since UBS was an integral pillar of the domestic loan and deposit market, the Swiss economy would have suffered enormous damage if the bank had collapsed. With the transfer of illiquid assets amounting to almost USD 40 billion to the stabilisation fund of the Swiss National Bank (SNB) and the subscription to mandatory convertible notes by the Confederation, UBS was stabilised and this danger was averted. Luckily we are now able to say that the endeavour was ultimately brought to a successful conclusion – even earning a profit for the Confederation and the SNB.

In terms of the usual indicators of the financial development of a country – such as the size of the financial sector or access to financial services – Switzerland has one of the most advanced  1  Cf. Levine 2005. BIS central bankers’ speeches  1  financial systems in the world.2 At the same time, the economic importance of the banking industry in this country is above average. It generates an annual gross value added of some 6% of GDP and currently employs about 150,000 people. In addition, at least in the years before the financial crisis, the industry made a significant contribution to overall economic growth.3 When banks are familiar with the local conditions and are also able to integrate knowledge concerning Swiss macroeconomic conditions into their business decisions, this enables them to provide particularly efficient services to the Swiss economy. It is therefore advantageous for our country to have locally established banks which make their decisions here in Switzerland. It is not only with services which benefit companies and households located in Switzerland that the Swiss banking industry creates value added. As we all know, the industry is also very active in the international arena – on the one hand, via exports,4 that is, through the cross- border provision of financial services from Switzerland, and on the other, through its actual presence abroad. In this respect, the most important source of income is the crossborder wealth management business for private customers.
BIS Review 62/2007  5  Changes for more efficient communication Ever since the inflation target was introduced, openness and clarity have been guiding principles for us. We have gradually implemented changes to become more transparent and more efficient in our communication. In February we presented for the first time our own forecast of the development of the policy rate over the coming years, something that our colleagues in Norway and New Zealand have also done. And as I mentioned earlier – a central bank can hardly be much more open and clear with regard to its monetary policy intentions. This increases the opportunities for evaluation and accountability. It has also become easier for us to explain our decisions and forecasts and to outline alternative scenarios for the interest rate. We are better able to live up to the requirements made in our interaction with the general public and the financial markets. There are also other examples of measures taken to increase our openness. Here I am thinking about the publication of minutes from the monetary policy meetings, our monetary policy reports, the many speeches held by Executive Board members every year and the hearings of the Governor by the Riksdag Committee on Finance. Clarity, not just openness – quality, not just quantity But efficient communication is not merely about quantity, it also concerns quality. Publishing a lot of information and doing so very often does not necessarily make the message clearer and the communication more efficient. It is not enough to merely be open.

Access to credit  Mar-17  Oct-16  May-16  Dec-15  Jul-15  Feb-15  Sep-14  Apr-14  Nov-13  Jun-13  Jan-13  Aug-12  Mar-12  Oct-11  May-11  Dec-10  Jul-10  Feb-10  Sep-09  Apr-09  Nov-08  Jun-08  Jan-08  Aug-07  Mar-07  percent 24 22 20 18 16 14 12 10 8 6 4 2 0  Interest rate of mortgage loans, RON (%)  Interest rate for new mortgage loans, RON (%)  ROBOR 3 M  price to income  Source: Eurostat, NBR, Credit Bureau  10  Figure 14. Mortgage credit and the gross savings rate percent 30  percent 16 14  Figure 15. Share of local currency mortgages percent 100  25 75  12 20  10 8  15  6  50  10  4  25  5  "First house" (%GDP) Mortgage credit other than "First House" (%GDP) Gross saving (%GDP) (rhs)  Source: NBR, FNGCIMM, World Bank  dec.-16  mar.-16  iun.-15  sep.-14  mar.-13 dec.-13  iun.-12  sep.-11  dec.-10  mar.-10  Mortgage credit (%GDP)  0 iun.-09  2016  2015  2014  2013  2012  2011  2010  2009  2008  0 2007  0  sep.-08  2  Share of outstanding RON mortgage-backed credit (%) Share of new RON mortgage-backed credit (%)  Source: NBR, Credit Bureau  11  Figure 16.