samchain/econo-pairs-v1 huggingface dataset:
The Implications of Evolving Policy Regimes”, presented at: Monetary Policy and Uncertainty: Adapting to a Changing Economy, a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 28 – 30, 2003. BIS Review 158/2010  1  1720 2 to the “Panic of 1907”, which was only solved by the forceful intervention of John Pierpont Morgan, and which ultimately convinced U.S. policymakers of the necessity to establish a central bank. But why should monetary regimes delivering strong price stability be vulnerable to asset price bubbles and financial crashes? A long term perspective suggests that banking systems tend to periodically generate asset price bubbles even under radically different monetary regimes. Having an outburst of several years of excessive credit growth, or for the old days financial crisis, the rising exposure of some financial institutions to asset price volatility has repeatedly led to financial crises. Historical experience before world war I, where price stability has been unmatched ever since, should have reminded all of us, financial market participants and policy makers alike, that price stability is no blanket insurance against financial instability. B. Price stability is necessary for financial stability  The most obvious case in which price instability automatically leads to financial instability is that of deflation, via the “debt deflation” mechanism originally identified by Irving Fisher with reference to the Great Depression.

This, in turn, exerted a paralysing effect on a significant fraction of spending decisions, thus playing a key role in triggering the 1930s Depression and the resulting deflationary spiral. 5 What should we conclude from this brief excursus? In launching the economic revolution which unbound China and ultimately propelled it among the world powers, Deng Xiao-Ping famously exhorted his countrymen to “Seek truth from facts”, 6 in stark opposition to the ideological approach which had dominated up until then. Within the present context the facts are clear: on the one hand, price stability is a necessary precondition for financial stability, although it is by no means a sufficient one; on the other hand, a key reason for preserving the stability of the financial system is in order to avoid potentially significant risks to price stability, in one direction or the other. Let me now turn to discussing several issues concerning the joint implementation of, and the interaction between, monetary and macroprudential policies. II. Issues concerning the joint implementation of, and the interaction between, monetary and macroprudential policies  We are currently in uncharted waters. The new mix of macroeconomic policies, with the setting up of macroprudential policies, is being developed as we speak. Some issues are already clear: we have two objectives – price and financial stability – which, based on standard economic analysis, means that we will need two separate instruments to achieve them.
For regulation to respond dynamically to changing circumstances in order to preserve systemic stability, macroprudential policy is needed. In the United Kingdom, the primary objective of the new Bank of England Financial Policy Committee (FPC) is to protect and enhance the resilience of the UK financial system, with a subordinate objective of supporting growth and employment. As well as being able to make Recommendations to the UK prudential supervisors and securities regulators on anything relevant to stability, Parliament has given the FPC power to direct changes in capital requirements for banks. Macroprudential tools and system resilience In some ways, the effects of a temporary change in macroprudential capital requirements will be similar to a permanent change in the capital regime. An action to increase banks’ equity base by, say, 10% will increase their loss-absorbing capacity by 10%. That leaves the system better placed to cope with losses should they crystallise. As such, irrespective of whether the action dampens the boom phase of the credit cycle, it will reduce the severity of the bust. Fewer, if any, banks will fail; a tightening in credit supply is therefore less likely to become a full-blown credit crunch; the resulting slowdown in output growth should be less severe; the default rate on bank loan portfolios lower; and so on. I rehearse that because the primary objective of a macroprudential intervention – improving the financial system’s resilience – can be progressed even if the credit boom itself is not tempered much.

This confirms their capacity to meet the targets set for 30 June 2012 by the European Banking Authority (EBA), thereby contributing to their adaptation to the future Basel III regulatory framework and the fulfilment of the objectives announced to the market. Lastly, the ACP has resolutely placed its individual supervision within a macro-prudential perspective. Our Authority has been particularly attentive to the way banks fulfil their role in financing the economy via the extension of loans to non-financial companies and to households, in a context in which both regulatory changes and liquidity constraints, particularly in dollars, have prompted certain groups to deleverage. It has undertaken an in-depth analysis and published studies on developments in household credit as well as the reallocation of households’ financial investments, particularly between bank savings products and insurance savings products. II)  2011 – and this is my second point – was a year that saw the reinforcement of the methods used in prudential supervision. It was above all the year in which the process of merging banking and insurance supervision was completed. Having been set up in the midst of the crisis that we are going through, the ACP continually reviews the methods it uses to deal with new challenges. On the one hand, the traditional activities of on- and off-site inspections have been enhanced by taking the best procedures and practices from each of the two sectors, leading to improved quality and comparability in the assessment of the situation of the different institutions being inspected.
So it is clearly in our own interests as well as theirs that the Asian economies recover as rapidly as possible and that we help them towards that end. That represents a difficult international economic and financial agenda for the future which, given the time, is perhaps the subject for another lunchtime occasion. The immediate first step is financial stabilisation in Asia, and my message to you today is that we are making progress towards that end. BIS Review 5/1998

As conditions in the labor market start to improve, workers are more willing to quit a job to search for a better job. While the quit rate has been unchanged at 1.5 percent for the past 8 months, quits as a proportion of total separations increased to 49 percent in October from 41 percent a year earlier. Also encouraging, employment in Temporary Help Services has increased by 494,000 since September 2009. Firms often hire temporary workers as a precursor to adding permanent staff. Finally, initial claims for unemployment insurance continue to edge downward, indicating that the risk of losing a job is diminishing (Chart 3). There are risks associated with every economic forecast. Some risks are to the upside, while others are to the downside. An important downside risk for this year is the housing market. Recall that the housing market was the epicenter of the financial shock that resulted in the Great Recession. Unlike the real economy, which has shown recent signs of strengthening, housing markets showed some tentative signs of life early last year that gave way to further weakening later in the year (Chart 4). This pattern likely reflected in part the conclusion of tax credits supporting housing purchases. BIS central bankers’ speeches  1  Of particular note, house prices increased moderately early last year, but resumed their decline as the year came to a close. In October, the CoreLogic national house price index was down 3.9 percent from a year earlier (Chart 5).
Recent runs on short-term bank liabilities and the fiscal crisis in the euro area are a clear example of this. No one wants to be the last one to withdraw his deposits from a tottering bank, sell bonds issued by a country heading for insolvency, or rid himself of the currency of a country facing an imminent balance of payments crisis and potentially unsustainable debt burden, even though it may only be unsustainable provided that other investors think it is. The capital controls stopped a run on Iceland’s currency. In a sense, they also undermined confidence for the long term – that is, investors’ confidence that Iceland’s economy and public sector finances could achieve balance and sustainability in the absence of controls, knowing that the fragile balance created by the controls is based on coercing many investors to hold króna assets. Ultimately, confidence can be established only under conditions of free trade, not through coerced transactions. Fortunately, however, investors’ view on the Icelandic economy is diverse. Some understand quite well that behind the cloud of dust swirling in the wake of Iceland’s financial collapse is a country fraught with opportunity. When the dust has settled, Iceland’s net international investment position may turn out to be lower than it has been in decades, and in spite of sizeable gross debt, the Treasury’s net debt position indicates that it will be possible to reduce gross debt rapidly, if the programme of fiscal consolidation set forth is followed strictly.

In addition, a number of investment projects are extremely foreign exchange-intensive because of imports. The króna could depreciate as a result, with heavy outflows of foreign currency, even if there were ample opportunities for investment. This is the problem the liberalisation strategy is attempting to solve. Emphasis is placed on protecting the foreign exchange reserves by converting short-term claims against domestic entities to long-term investments to the extent possible. The Central Bank acts as an intermediary, and the auction format ensures that only a small portion of the foreign exchange reserves are in play at any given time. The auction format also ensures that transfers of banking system liquidity will not be large enough to jeopardise the system’s stability. The foreign exchange reserves are protected as well by the requirement that investors bring foreign currency into the country and exchange it for krónur in the domestic market. This will offset the foreign exchange outflows that often accompany new investment. Another important aim of the strategy is to ensure short-term Treasury financing. Even though significant progress has been made in controlling the fiscal deficit after the crash and halting the accumulation of unsustainable debt, it is important not to underestimate the current dependency of Treasury financing on the capital controls. More than half – and, in some instances, as much as ¾ – of the stock of short-term Treasury bonds is held by nonresidents.
That “portfolio rebalancing” channel is thought to have been largely absent in Japan, where most of the Japanese government bonds purchased were held by the banks, which in turn used the proceeds to directly de-leverage without obviously increasing the demand for other assets (although the purchases may have had an impact through other channels). Buying assets held by non-banks was relatively straightforward in the UK. At the time, insurance companies and pension funds were the largest category of holders of gilts in issue. Although commercial banks act as market-makers for gilts, and were thus the immediate conduit for the gilt purchases, they typically held only a very small amount on their own balance sheets as part of their liquidity portfolios. Market-makers had to source gilts in the market before selling on to the Bank. Moreover, because the banks’ own liquidity holdings were generally very short-dated, we were able to target our purchases by restricting them to be longer-dated: initially we only bought gilts over 5 years maturity. 9 We were also conscious of the pressures on pension funds and their need to match longdated liabilities by buying index-linked and longer-dated nominal gilts. Real yields and ultra-long nominal yields were already being driven to low levels by that demand. Hence, we restricted the Bank’s purchases to nominal gilts only and initially capped the maturity at 25 years. The latter restriction was later relaxed as the purchase programme expanded.

In order to deliver the high-level policy objective of the MPC to inject extra money into the economy, there were a number of operational objectives for Bank staff. First we wanted to make sure that we were actually able to buy the targeted quantity. There were market participants who told us that this would not be possible as the asset managers would not be able to move away from their benchmark holdings (the initial target being £ Once the programme was announced, the Bank took steps to proactively discuss our operations with market participants, to allay that initial scepticism. In the weeks that followed the announcement in March 2009, we called in our contacts at the Gilt-edged Market Makers and many of the larger asset managers, to explain the operations and to encourage them to participate. The market collectively responded very positively, and the total value of offers exceeded the targeted purchases in every auction undertaken. A second operational objective was to ensure that purchases were at a fair market price. We had to consider this against the backdrop of a heavy UK Government issuance programme: we were alert to the risk that market participants might buy direct from the Government’s  8  For example, on timing see Shirakawa (2010) Uniqueness or Similarity? Japan’s Post-Bubble Experience in Monetary Policy Studies. Available at http://www.boj.or.jp/en/type/press/koen07/ko1009c.htm. 9  Subsequently relaxed to 3 years, once the Bank started to hold more than 70% of some of the gilts in issue.
The mechanisms for mopping up the excess liquidity need to be put in place early. Meanwhile, the scale of fiscal stimulus, and funding needed to support this, has raised the spectre of destabilised sovereign bond markets and the crowding out of private borrowings. This does not bode well for private capital formation, and could create stresses downstream for corporations which do not have the advantage of sovereign backing. Further, if deficits are seen to be structural, market reaction could negate much of the effect of fiscal stimulus. There is also the issue of how to  BIS Review 30/2009  3  restore private-sector driven intermediation of credit in due course. While government support for businesses’ access to credit is necessary now, it cannot continue indefinitely. In other words, even as we take unconventional measures, we need to have an eye on medium-term sustainability, and make clear our "exit" strategy and timing. Just as we must not be behind the curve in taking action to stabilise markets, we need to anticipate what lies ahead and plan accordingly. This is crucial because that later-stage "exit" action represents not just the end of this phase but a crucial transition into another set of conditions with totally different policy demands. Third, we need to consider the global dimension of our responses, and the impact on other economies. For instance, the bank deposit guarantee scheme that first started in Ireland triggered a domino effect and made its way to this region.

Credit flows to corporations have been affected by the heightened risk aversion of domestic banks as well as by some pull-back by global banks. A few economies have experienced considerable capital outflows. The economic contraction will certainly affect the loan books of banks. Should the downturn be deep and prolonged, the resilience of banks with weaker risk management systems will be severely tested. It is necessary to remain vigilant. However, Asia’s economic performance and policy responses so far provide assurance that the medium-term growth story remains compelling. FDI and domestic investments have increased over the years, and intra-region production networks have deepened. Both the hard and soft infrastructures have improved significantly in the last decade. Domestic consumption’s contribution to growth has grown steadily, and will play a bigger role in future. The drive towards deeper regional integration remains unabated. Just days ago, ASEAN signed the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area, and re-affirmed its commitment to implement the ASEAN Economic Community. One important question for many participants here today is the policy direction of Asian governments towards the financial sector. I believe that authorities in the region will continue with the twin track of developing the banking system and capital markets. The importance of a well-functioning financial system in supporting economic growth and wealth creation is well recognised in this region. The need for funding to promote investment, develop infrastructure  4  BIS Review 30/2009  and facilitate urbanisation will return.
If inflation stays too low, people will start to expect it to stay that way, creating a vicious cycle, pushing inflation further down over the longer term, and making it harder to achieve our goals through monetary policy. The Second District All of these numbers tell the story of the U.S. economy at the macro level, but they’re not always reflected in the real experiences of Americans across the country. I referred at the beginning of this speech to the Second District—which includes New York State, parts of New Jersey and Connecticut, Puerto Rico, and the U.S. Virgin Islands—and is the area the New York Fed is responsible for. I spent yesterday and today meeting with district business leaders, community organizers, and elected officials, hearing about their work, their successes, and their challenges. People’s experiences are influenced by the macro level, but their local economy plays an equal, and often more important role in shaping their economic opportunity. One aspect of the Fed that we don’t talk about enough is the work our regional economists and our outreach teams do, trying to understand what’s going on at the local level. While the U.S. economy has been growing for the last 10 years, analysis by New York Fed economists shows that not everyone is feeling the benefits equally.

2 Abel, Jaison R. and Richard Deitz, Why Are Some Places So Much More Unequal Than Others?, Federal  Reserve Bank of New York, Economic Policy Review, forthcoming 2019. 3/3  BIS central bankers' speeches
Dimitar Radev: No stone has been left unturned on the topic of euro adoption in Bulgaria Statement by Mr Dimitar Radev, Governor of the Bulgarian National Bank, during a hearing at the 48th National Assembly, Sofia, 27 October 2022. *** Mr. Speaker, Ladies and Gentlemen Members of Parliament, Let me begin with this. The true debate today is for or against the euro – the euro as a symbol of the European project and our commitment to this project. In the item on the agenda where we are considering this issue, this topic is placed below 'expert questions'. In the next item, this topic comes up directly. However, in both cases the topic is the same. Let me say it squarely, the question about the euro area is first and foremost a political one, not an expert one, and the answer to this question must be given by the National Assembly. Actually, in my opinion, the question is whether Bulgaria will stay indefinitely in the future anchored in Europe's deep periphery, with the poverty, corruption, institutional impotence and external dependencies inherent to this periphery, or a joint effort will be made to change all this by speeding up the already greatly delayed process of joining the euro area. A few words about the expert analyses supposed to inform this process. This is the third discussion in Parliament on the topic of analysis of the implications of the euro area accession, in which I have taken part over the last six months.

From that date until today another 200 decisions or so were made in the context of Bulgaria's participation in the EU's Banking Union, backed up by serious analytical work. Therefore, as far as the BNB is concerned, no stone has been left unturned on this topic. What I would like to stress is that there are enough representative, thorough and up-todate analyses on the implications of Bulgaria's accession to the euro area. The addition of more analyses at this moment would only further delay the process and would hardly enhance the quality. What we need now is not new analyses on this subject, but concrete actions. How prepared is the BNB to join the euro area? The BNB is in a unique situation. It is the first, and until now the only, Bulgarian institution which, since 1 October 2020, has been a full member of a key institution of the euro area, as is the EU's Banking Union with its two operating mechanisms: the Single Supervisory Mechanism and the Single Resolution Mechanism. Therefore, the BNB is the institution which, not based on theoretical analyses but from first-hand experience, can tell the difference between being outside and being inside the euro area, i.e. we are speaking not about anticipated but about real implications. Most recently, it's been two years since Bulgaria became a full member, and our assessments are unequivocally positive. Now we have information and a database which would have been inaccessible to us before our membership, even if we had invested huge resources.
It has fostered both price and macroeconomic stability through its credibility and has shielded many euro area countries from significant exchange rate volatility and financial market turmoil. It is all the more important to acknowledge these achievements since it was said in some quarters that the euro would never see the light of day or that it would create severe economic disruptions. Those scenarios have not materialised. In the post-war European adventure, the euro represents a major milestone. That said, and whatever its own merits, a currency is not an end in itself, even though the new EU members are keen on adopting it as soon as possible. Entry into Monetary Union must be founded on a sustainable convergence process. Enlargement of the euro area also gives renewed impetus to addressing the challenges ahead as it makes it more pressing for policy-makers to tackle long-ignored weaknesses. This is a crucial contribution to building a stronger EU, in which I strongly believe. All in all, let me express my confidence in the future of the euro and of the single monetary policy of a large Eurozone.

Figure 1: HICP inflation in the euro area  16 14 12 10 8 6 4 2  05  03  20  20  01  99  20  19  97  95  19  19  93  91  19  19  89  87  19  19  85  83  19  19  81  79  19  19  77  19  75  19  19  19  71  -2  73  0  Source: ECB - M. Ehrmann and F. Smets (2005). Note: The chart shows quarter-on-quarter (red) and year-on-year (blue) inflation, and its average value over three sub-periods that have been identified by breakpoint tests. 8  BIS Review 4/2006  Figure 2 ECB Survey of Professional Forecasters: Expected inflation at various horizons (average) % 2,8 2,6 2,4 2,2 2,0 1,8 1,6 1,4 1,2 1,0 1999q1 1999q3 2000q1 2000q3 2001q1 2001q3 2002q1 2002q3 2003q1 2003q3 2004q1 2004q3 2005q1 2005q3 n  n+4  Q+4  Q+8  Source: ECB – Production: Banque de France – update October 2005.