samchain/econo-pairs-v1 huggingface dataset:
Support for using macroprudential tools in the United States has also been bolstered by our experience during the financial crisis. The U.S. housing boom and subsequent bust might have been less severe had a set of macroprudential measures been in place at the time to limit the degree of leverage and speculative activity in the housing sector. The housing boom was fueled by optimistic expectations for house price appreciation, combined with lax underwriting standards embodied in such practices as no-doc mortgages and widespread speculative activity by investors. I remember, for example, the website, Condoflip.com, which says it all in terms of the degree of speculative fervor that was evident at the time. If underwriting practices had been held to high standards (e.g., strict mortgage service-toincome ratio limits had been honored) and speculative activity had been constrained (e.g., by lower loan-to-value ceilings for investors with multiple mortgage liens outstanding), this might have limited the size of the boom and subsequent bust. My own view is that while the use of macroprudential tools holds promise, we are a long way from being able to successfully use such tools in the United States. There are two major sets of difficulties. First, unlike monetary policy and microprudential regulation, there is not a welldefined framework for identifying emerging imbalances and applying macroprudential tools in response. A recent tabletop exercise conducted by a number of Federal Reserve Bank presidents, which I will discuss a bit later, indicates some of the difficulties here.

First, I will discuss briefly what we learned at tabletop exercise with a number of Federal Reserve Bank presidents concerning the potential use of macroprudential tools in response to sectoral imbalances. I think the tabletop exercise underscores the difficulty of using macroprudential tools in practice in the United States. Second, I will discuss the issue that Adam Posen has raised – whether we should focus on the use of rules that are hardwired into the financial system ex ante or instead favor using macroprudential tools in a more discretionary, ex post basis, once particular problems have been identified. In the tabletop exercise, the five Federal Reserve Bank presidents who are members of the Subcommittee on Financial Stability of the Conference of Presidents discussed the best way to respond to a scenario in which the commercial real estate market was overheating.2 The scenario was much more detailed than that, but the commercial real estate sector was the major problem with respect to financial stability. The stated goal of the exercise was to reduce the risk posed by the commercial real estate boom to financial stability and, by extension, to the Federal Reserve’s ability to achieve its macroeconomic objectives of maximum sustainable employment and price stability. Prudential tools under consideration included:  2  2  See Macroprudential Policy: Case Study from a Tabletop Exercise, Tobias Adrian, Patrick de Foutnouvelle, Emily Yang, and Andrei Zlate, Federal Reserve Bank of New York Staff Report No. 742, September 2015.
On such markets, central government therefore usually applies regulations, such as those concerning the electricity network, for example, or actively runs the system, such as for the rail network, for example. Another characteristic of the payment market is the existence of positive network externalities. This means that when new users join a system, the utility increases for all participants, even those already in the system. Another example of a product with positive network effects is the telephone: the utility of having a telephone increases as more people join the telephone network, allowing you to call them. This means that coordinating different players on the market may lead to economic gains for society. Since utility increases with the number of users this means that the market has a tendency to eventually end up being dominated by a monopoly that takes over (a situation of natural monopoly, just as with economies of scale). The combination of economies of scale and network effects thus creates tendencies towards heavy concentration. Monopolies that maximise their returns will give rise to efficiency losses in the economy in general. 16 All in all, this suggests that it may be justifiable for central government to undertake the task of regulating the market, to reduce the power of monopolies, and as coordinator, to ensure that network externalities are internalised, which is exactly how it works in Sweden today. We can thus observe that, as money provides the necessary lubrication for all economic activity, efficient and secure forms of money are important for economic growth.

Thus, the central bank’s inflation forecast at the policy horizon becomes the intermediate target.2 In the case of Chile, our inflation target is three percent, and the time horizon is two years. As long as this target is credible, monetary policy will not only achieve inflation stability, but will also reduce the volatility of the business cycle. Analytically, the FIT regime is based on the idea that the policymaker minimizes a loss function that penalizes both inflation deviations from the target and deviations of output from full employment. Therefore, what the FIT does is to optimize the tradeoff between output  1  A predecessor was Taylor (1998) who called this period the “long boom.”  2  In order to avoid indeterminacy or multiple equilibria, the forecast must be the central bank’s forecast and not that of the market (Bernanke and Woodford, 1997). 2  BIS central bankers’ speeches  volatility and inflation volatility. The time horizon is what makes this scheme “flexible.” The target is not achieved in the short run since it also takes the output costs of achieving the target into account. A rigid inflation target is one in which the central bank only cares about inflation, and hence the horizon would be the shortest possible, enough for monetary policy to affect output. The longer the time horizon, the higher the weight of output volatility in the loss function (De Gregorio, 2007).
I am also confident that this will open up a new chapter in the history of credit bureaus and enable these entities to play an even greater role in the future development of the financial industry in Malaysia. 2  BIS Review 76/2007

Consequently, the current overall situation of the Swiss economy remains difficult despite the many rays of hope with regard to the economic cycle. Also, the danger of deflation does not yet seem to have been entirely averted. We have not yet reached the moment for a change of direction in monetary policy in Switzerland. After analysing the available economic data and forecasts and taking various risk considerations into account, there is no need for the SNB to take monetary policy action at present. The SNB can afford to adopt a holding stance. However, this holding stance should not be mistaken for inactivity. The SNB continues its firm implementation of an extremely expansionary monetary policy and the unconventional measures launched on 12 March 2009. The Swiss franc money market is still being provided with a generous and flexible supply of liquidity, interest rates remain low, Swiss franc bonds are still being purchased to dampen the level of risk premiums on the Swiss franc bond market as and when needed and the appreciation of the Swiss franc will continue to be prevented. BIS Review 27/2009  1
But it is worth reiterating that the Bank’s intervention last autumn was to focus on the resilience of the gilt market, rather than to protect the funds and schemes themselves. So LDI funds should carefully consider their individual risk profile. And pension schemes should not mistake naturally occurring variation in resilience, which reflects variation in risks, for a race to the bottom. These proposed resilience levels are broadly consistent with those firms have been maintaining since the co-ordinated regulatory action last autumn. And indeed they have been put to the test recently. Between end March and late May, the benchmark 30-year index-linked gilt yield rose by 82 basis points. During that time, the largest five-day move stood at 27 basis points. These changes in yields mechanically reduced the resilience of LDI funds and led to a number of LDI funds recapitalising in order to replenish their resilience. This recent volatility shows that the resilience framework recommended by the FPC is functioning broadly as intended, with funds holding significantly larger buffers than last year on average and initiating recapitalisation at far higher levels of resilience than they did previously. It means they have managed to absorb rather than amplify this shock. So far so good. We will though assess whether there are any lessons to be learned from this recent experience for the implementation of the FPC recommendations and TPR guidance. Of course, LDI funds are not expected to self-insure against all possible shocks.

I’ve spent this morning talking about measures to tackle the root cause of the stress last autumn, poorly managed leverage. But LDI funds aren’t the only non-bank to use leverage. [20] And leverage is also not the only vulnerability in the non-bank system. Forced selling that can follow from leverage can also arise from liquidity mismatches[21] or from a lack of preparedness for margin calls. [22] Identifying vulnerabilities is only half the battle. We also need to understand how market participants will behave when a stress hits. To this end, the Bank is very shortly launching its exploratory exercise to enhance understanding of the risks to and from non-banks, their behaviours, and how these behaviours can amplify shocks. As part of this exercise the Bank may reach out to some of you attending this conference. Shining a light on how market participants may behave collectively in a stress will help both the Bank and yourselves better prepare for such events. You’ll hear plenty from us once the exercise is launched. In particular, my colleague Lee Foulger will be giving a speech next week outlining how this exercise will helps us to better understand system-wide resilience. But what should we do about these vulnerabilities? We should seek to contain them and to mitigate their financial stability impact. This is what I’ve laid out today with respect to LDI funds’ leverage. Further frameworks may need to be built up.
Those small countries in particular had to accept the new economic reality of lower demand, higher unemployment and forced fiscal consolidation due to a fall in tax income or borrowing difficulties. The other group consists of bigger or more closed economies that were relying on domestic demand. They were able to smooth the initial impact of the crisis with more extensive government support measures. There was also the expectation that the crisis would be temporary. With the benefit of hindsight we know that we were not facing a temporary bump on the road, but a more fundamental need for adjustment. The initial smoothing of the shock may have been even more costly as it resulted in a higher level of public debt. Secondly, the required policy adjustment involves a dimension which we now consider critical: the speed of reacting and the decisiveness of policy actions. The Baltic countries have learned it firsthand through their experience, which of course is the hard way. There are few economists today that would fundamentally question the need for fiscal consolidation and structural reforms in Europe, as the crisis has clearly turned out not to be temporary. However, we all know it is politically difficult to cut government spending and implement reforms fast. The natural tendency for most politicians is to favour gradual adjustment. “Gradualists” say that in case of fast changes the risk of possible policy mistakes is higher, leading to losses in physical and human capital. Opponents of that view, including myself, certainly acknowledge those risks.

But we feel that the costs of delayed action may sometimes outweigh its benefits, as postponing the inevitable and failing to accept the changed reality will lead to additional unnecessary costs. One should not want to keep alive old structures that clearly cannot be sustainable in the changed world for longer than necessary. This is a waste of limited resources and reduces long-term productivity. There is a saying that “a crisis should not be wasted” – negative shocks to an economy should lead to productivity gains. Our experience shows that quick decision-making and decisive policy actions can shorten the period of uncertainty that also weighs on economic activity. People and entrepreneurs in countries with delayed reforms overreact, leading to a higher level of risk aversion than necessary. Overshooting in risk aversion results in lost jobs and postponed investments. BIS central bankers’ speeches  1  Estonia, for example, lost almost 20% of its GDP during the crisis. By now we have regained the pre-crisis level, contrary to many countries that preferred to delay the necessary reforms. Some of them still face years of decreasing economic output. In summary, I would like to stress that prolonged fiscal consolidation and structural reforms can lead to unnecessary costs to the society. Some countries have chosen to delay the pain and take only gradual steps with their structural reforms, but this has in fact resulted in a reduction of the overall economic activity to the extent that might be no less than the shortterm cost of a quicker adjustment.
In conclusion, let me stress 4 points: It is hard to anticipate the role that stablecoins and more generally crypto-assets might play in the payment system of the future, especially since the features of these assets look set to change considerably. While it is clear that they offer opportunities to improve our payment systems, they can also bring quite material risks which must be addressed. In that context, it is first and foremost the responsibility of private sector entities to design arrangements which do not bring undue risks to our payment systems. Regulatory and oversight authorities also have an important role to play in order to ensure that risk management requirements to be met are clear, comprehensive, coherent acrossborders and complied with, while preserving the potential for technological innovation offered by stablecoins. Beyond contributing to the adjustment of the regulatory and oversight frameworks to address these risks, central banks may make further contributions, notably by revisiting and possibly adjusting the conditions under which they make central bank money available for settlement purposes. To that end, we should keep an open-minded approach and develop an in-depth understanding of innovations currently spreading across the financial sector, including through experimentations. This is critical for our capacity to help deliver a sound, proper and updated regulatory framework supporting innovation, and adequately mitigate their inherent risks. This is also critical for our capacity to adapt the performance of the different roles we play to fulfil our financial stability mandate and conduct efficient monetary policies. Thank you for your attention.

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Graph 4 Simplified Balance Sheet of SNB as of 31th December 1998 in Billion Dollars with Gold at Market Price Assets  Liabilities  Gold Holdings & Claims on Gold Claims in Foreign Currencies Claims in Swiss Francs  24 41 17  Total  82  Monetary Base Liabilities towards the Confederation Gold Provision Capital, Reserve & Provisions  29 11 15  Total  82  27  Two arguments justify a transfer of gold reserves:  3  BIS Review 73/1999  Firstly, the existence of considerable capital resources within the SNB balance sheet shows that we are endowed with more reserve assets than necessary from a monetary point of view. There is no example of a central bank of a G10 country with such a proportion of capital and undistributed profits in its balance sheet (see graph 5). Graph 5 Estimate of G10 Central Banks’ Net Wealth in Proportion of GDP United States Germany France I taly Switzerland Netherlands Japan United Kingdom Belgium Sweden Canada 0%  5%  10%  15%  20%  The question therefore naturally arises whether the moment has not come to allocate a part of the Bank’s own wealth to other purposes than monetary policy. Secondly, our balance sheet shows clearly that any transfer of the revaluation gain or part thereof cannot take place in Swiss francs or in foreign exchange.

Our domestic assets are too low and a transfer of foreign reserves would have a negative impact on the Bank’s operations: • •  the SNB would be impeded in conducting its monetary operations (interventions, money market operations) the bank’s profitability and liquidity would diminish drastically. Consequently, a transfer in gold of a part of the valuation gain is the obvious solution. A group of experts has been asked to make an estimate of the excess reserve of the bank. 2.2 The proposals The group of experts has come to the conclusion that a capital corresponding to 1300 tonnes of gold could be withdrawn from the SNB’s balance sheet to be used for other purposes than monetary policy. Of these 1300 tonnes, 500 tonnes are to be set aside for financing the Swiss Foundation for Solidarity previously announced. What to do with the remaining 800 tonnes? A first idea would consist in transferring the remaining excess reserves to a public investment fund having more extensive investment possibilities than the SNB. Currently, our asset management policy is basically limited to fixed-income investments. The fund’s regulations should provide for investment in shares in order to achieve a higher long-term yield. But there is usually no limit to the imagination of politicians when money is to be distributed! Other concrete proposals exist. Some would like the excess gold reserves to be earmarked for specific goals such as improving the capitalisation of our social security schemes or for educational purposes.
It is a lot easier to keep things straight and be happy if your public persona and private persona are not in conflict – you are one integrated person. Being true to yourself also means facing up to problems and mistakes early. Early on in my career as a professional economist, I got involved in writing a paper about tax reform with the head of the firm’s research department. The night the paper went to the printers, I woke up with complete clarity that there was a mistake in the paper. The mistake did not affect the conclusions of the paper. It just slightly changed all the numbers and was obscure enough that no one would probably catch it. What to do? I decided to take my medicine. I walked into the office of my co-author the next morning and said that we needed to throw out the 10,000 copies of the paper that had been printed. The head of research – Leon Cooperman – was known for his – let me say this delicately – strong personality. But rather than blowing up at me, he said fine, let’s fix it. Facing up to the error must have actually worked in my favor since I won his respect. A few months later, he introduced me to Robert Rubin – who, as you know, went on to become the U.S. Secretary of Treasury. And through Robert Rubin I met all sorts of interesting people in the Clinton administration.

Think of the chain of events for me to get my “dream job” – head of the Federal Reserve Bank of New York. I had to decide to leave Goldman Sachs at the end of 2005; be asked by Timothy Geithner to be head of the Markets Group in 2006 and be smart enough to take him up on his offer; Barack Obama had to win the presidential election; Tim had to be selected to be Treasury Secretary; and the Board of Directors of the Bank in collaboration with the Board of Governors in Washington, D.C., had to agree on me as Tim’s successor. If you ever thought that train of events was even remotely likely, I think you would have been considered delusional! My final piece of advice is the most important one: Don’t forget all that they have taught you here about thinking critically and speaking up. So, let me sum up. Go into the job market with enthusiasm and don’t be daunted by the inevitable rejections. That’s part of the process of getting started. Don’t feel in a rush to figure out all the details of your career. If you are true to yourself, continue to build your human capital and don’t forget everything that they have taught you here, I know that you will meet with every success. Thank you and, most importantly, good luck! 4  BIS Review 71/2010
Link  to  the  speech:  3  prevent that some weak banks run into acute problems. In fact, some research results 3 based on OECD countries have indicated that the inflation rate is higher and more volatile in countries where the central bank has the sole responsibility for banking supervision. A failure in a supervised entity might affect the reputation of the NCB to the extent that its capability to perform effective monetary policy is hampered. In a crisis, there is a management problem in that the solution of a crisis in the supervised entities will preoccupy the minds of the NCB management so that it will not have the time to focus on other important issues. The Finnish approach is an attempt to solve this dilemma by having a separate board for the supervisory decisions but still being a part of the central bank for its funding and sharing of administrative resources. An overarching argument is that the Parliament should not delegate too much power to a non publicly elected body such as the central bank. But I do not see this as a major problem. The Parliament should set the parameters and limits for the powers of the NCB and the NCB will have to account for its conduct on a regular basis. If supervision is located in another authority, there will be similar issues of delegation and accountability. I noted earlier that the current trend is to move supervision out of the NCBs.

While nominal export turnover fell sharply, real export volumes held up much better. Hence, when the strong appreciation of the Swiss franc raised prices for foreign buyers of Swiss products, Swiss companies responded by cutting export prices, thereby preventing a sharp fall in real export volumes. Further evidence for this ‘margin compression’ comes from our own surveys, which SNB delegates for regional economic relations conduct regularly among Swiss companies. Global demand conditions have deteriorated somewhat in recent months. Emerging market economies in particular – but also some commodity-producing countries – have seen economic momentum fade. By contrast, major advanced economies continue to recover, albeit at a modest pace. On balance, we expect the global economy to grow moderately in the coming years. This should help to partially offset the drag from the overvalued Swiss franc. Thus, following a contraction in the first quarter of 2015, economic activity in Switzerland expanded again in the second quarter. In our estimation, GDP is likely to grow by close to 1% this year. Price stability is not in doubt In the last part of my speech, I would like to present our inflation outlook. Last year, the inflation rate – as measured by the consumer price index – averaged around zero. This year, inflation has fallen well into negative territory.