samchain/econo-pairs-v1 huggingface dataset:
See Michael Joyce, Ana Lasaosa, Ibrahim Stevens and Matthew Tong, “The Financial Market Impact of Quantitative Easing,” Bank of England Working Paper No.393, 2010, and Joseph Gagnon, Matthew Raskin, Julie Remache, and Brian Sack, “Large-scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York, Staff Report No.441, 2010. BIS Review 169/2010  3  Sharp fiscal consolidation and very slow growth in the periphery countries would, of course, have some adverse impact on the demand for our exports. But the more significant links are potentially through the financial system. Fortunately, UK banks have done much to improve their resilience over the past couple of years and, even under a very adverse scenario, they should be able to absorb the likely losses on their direct exposures to Greece, Ireland, Portugal and Spain without too much difficulty. There is, though, the possibility of further indirect effects arising through the interconnectedness and cross-border operations of European banks which could amplify the impact. So some adverse effect on the funding costs of UK banks and the supply of credit remains a possibility. Harder to gauge is the potential effect on household and, especially, business confidence. In the aftermath of the collapse of Lehman Brothers, this was arguably the most significant transmission channel to the real economy. An intensification of the sovereign debt problems in the euro area could therefore administer a blow to the recovery here.

In contrast, there are signs that the depreciation in sterling is having the expected effect on the market share of goods exporters. That is also reflected in the robust growth in manufacturing output and in business surveys which report buoyant export orders. So far, there is less sign that the lower level of sterling is leading to the substitution of imports by domestically produced goods and services. But it is likely that the producers of internationally tradable goods and services take time to respond to the improved opportunities associated with a lower real exchange rate, especially if investment in foreign distribution networks or the repatriation of off-shored activities is required. So, other things equal, it seems reasonable to expect the impact of the lower level of sterling on net exports to continue to build through next year. The prospects for net exports obviously depend not only on the response to the past depreciation of sterling, but also on demand in the UK’s main export markets. While global growth has been strong over the past year, much of that has been in emerging economies that presently account for a relatively small proportion of UK exports. Growth has been patchier in the developed economies. In the United States, following a series of soft indicators through the late summer and early autumn, the US Federal Reserve announced additional purchases of US treasuries.
Debt There has been much comment on the build up of domestic debt in recent years. In aggregate, the ratio of household debt to disposable income is now over 150%, having risen from around 100% in the late 1990s. This upward trend is not unique to the UK, although the debt-income ratio here is a little higher than in most countries [Chart: 3]. Chart 3: Debt-income ratio across countries France Germany Netherlands Spain US UK Australia  Per Cent  200 180 160 140 120 100 80 60 40 20 0  97  98  99  00  01  02  03  04  05  Source: Data from Eurostat, the Federal Reserve and data sent direct from Reserve Bank of Australia. There are a number of key reasons for the increase, coming from changes both in demand and supply. Supply side factors include: a liberalised financial market place with new categories of lender and greater competition; new technology, in particular the widespread adoption of credit scoring techniques and data sharing that have given confidence to lenders in granting unsecured loans; and greater securitisation, enabling firms to write more business by diversifying and laying off the risk onto third parties without burdening their own balance sheets. On the demand side, there appears to have been a change in social attitudes towards debt that has made people more willing to borrow.

Nevertheless, the increase of aggregate demand will remain below the economy’s potential even during 2014, thus determining the gradual return of inflation to target. At the end of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 2.50%. 2  BIS central bankers’ speeches
Today I would like to address our key challenge in normalising our monetary policy instruments: preserving monetary accommodation, while switching back from net asset purchases to forward guidance on policy rates as the main instrument to steer our monetary policy stance. While this rotation proceeds, we will continue to operate with multiple, complementary instruments, including our policy of reinvesting the principal payment of securities purchased under the APP. The state of the euro area economy Following more than five years of increasingly broad-based economic expansion in the euro area, recent developments point to some loss of growth momentum. Preliminary data show that euro area real GDP expanded by 1.7% year on year in the third quarter of 2018, down from 2.2% in the second quarter. The slowdown in euro area economic growth since the start of the year has reflected in no small part a retreat from the strong growth of 2017. One-off country-specific or sector-specific factors have also contributed to slowing production in recent months. But factors related to protectionism, financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable. Surveys of euro area business activity and sentiment indicators have softened perceptibly relative to their earlier highs, although they remain in expansionary territory and are still above long-term averages for most sectors and countries. Overall, domestic demand continues to be supported by favourable financing conditions, as well as by the robust labour market and steady income and profit growth that these conditions have fostered.

11 / 12  BIS central bankers' speeches  I would like to make a final comment on the effects of our APP portfolio on bond yields. While, overall, our APP portfolio will continue to exert downward pressure on euro area long-term interest rates, other factors such as economic fundamentals and the creditworthiness of issuers, as assessed by market participants, remain key determinants of the levels of bond yields and spreads. Conclusion The winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation. The ongoing rotation from net asset purchases towards enhanced forward guidance on key ECB interest rates has preserved the ample degree of monetary policy accommodation that is necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. Prudence, patience and persistence will continue to inform our policy decisions. The sizeable stock of acquired assets and the associated reinvestments, as well as the strong anchor for policy rate expectations provided by our enhanced forward guidance, will continue to deliver the monetary policy stimulus necessary for inflation convergence. In any event, all our policy instruments can be adjusted to ensure that inflation moves towards our aim in a sustained manner. 1 This speech builds on my remarks at the UBS Conference, London, 13 November 2018. 12 / 12  BIS central bankers' speeches
Long-term yield spreads on Germany and central government debt in 2002 as a percentage of GDP for Finland, Italy and Sweden 250  250  120  120  200  100  100  150  80  80  100  100  60  60  50  50  40  40  0  0  20  20  -50  0  Finland  200  Italy Sweden  150  -50 1997  1998  1999  2000  2001  2002  2003  0 Finland  Italy  Sweden  Sources: Eurostat and the Riksbank. Chart 2. Productivity growth in the corporate sector and the output gap in Sweden 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  Productivity, corporate sector Output gap  -6  -6 -8  -8 75  78  81  84  87  90  93  96  99  02  Sources: Statistics Sweden and the Riksbank. BIS Review 42/2003  5  Chart 3.

It had shown an increase of 3.7% in December 1997. Financing raised on the domestic markets progressed vigorously, with the year-on-year advance standing at 9.2% in December 1998, after 6.6% a year earlier. Against a background marked by uncertainty surrounding the international environment and by prospects of a euro area-wide slowdown in activity, on 3 December 1998 the Monetary Policy Council of the Banque de France, in close dialogue with the other members of the European System of Central Banks (ESCB), decided to cut its main key rate, which had been set at 3.30% since October 1997, to 3.0%. This decision was inspired by three considerations: – – –  the need to ensure the cohesion of the euro area in the best possible conditions; the need to organize the convergence of short-term rates towards the lowest rates in the area, i.e. in particular French rates; the need to choose the level of key rates that was most appropriate at the time of entry into the euro. This decision constituted a further stage in the process leading to the transfer of responsibility for monetary policy to the European System of Central Banks as of 1 January 1999. In fact, the rate applying to the first main refinancing operations of the ESCB was set at 3% on 22 December 1998 by the Governing Council of the ECB.
Domestic credit growth slowed to 6.8 percent in February while deposits grew by 6 percent. Contraction in economic activities further eased the pressure on prices, with headline inflation declined to a minus 0.2 percent in March. Given the sharp dislocation in economic activities in the last few months, market consensus now seems to agree on a small negative growth for Thailand this year, but with an improvement in growth next year. This means the market expects the Thai economy this year to go through a period of sharp adjustment on account of the global slowdown before growth is resumed next year. This view is consistent with the current mainstream view that, with the strengthening of the policy efforts at the global level, the world economy should look better next year compared to this year. As for the Bank of Thailand, our Monetary Policy Committee in its meeting next week, will also be going over this same question in assessing the near-term outlook for our deliberation of monetary policy. Whatever growth numbers we come up with, they will be conditional upon the prospects of the global economy going forward, especially after the G-20 announcement of the new global policy. Turning now to a more positive note, regardless of the adjustment we have to go through this year, or even next year, the Thai economy at this time is fundamentally stronger, and is in a better position to weather the crisis, compared with the situations we were in ten years ago during the Asian financial crisis.

3/4  BIS central bankers' speeches  It has been said that regulators are pessimists in our DNA and always inclined to worry about things going wrong – and certainly, we cannot ignore the possibility of the failure of key FMIs no matter how remote, and this may occur in FMIs overseas. I started my speech this morning, noting the increasing connectedness between markets. This is true in the ‘life’ of a CCP - and can be true in its ‘death’ too. The failure of an internationally active CCP, that provides critical services in multiple jurisdictions, will have significant cross-border impact. When a CCP fails, its members are inevitably affected. Such members are likely to also have relationships with other financial institutions, or may trade and clear on other trading venues and CCPs. Through these network of interdependencies, the default of a CCP can trigger destabilising effects not only in the home market it serves directly, but outside of it. It is therefore important for authorities of jurisdictions that may be affected by a CCP’s failure to participate in that CCP’s resolution planning. Similar to the establishment of Supervisory Colleges to support ongoing supervisory co-operation, setting up Crisis Management Groups (CMG) for CCPs will allow the cross-border impact to be considered in resolution planning. In a failure situation, when resolution actions are time-sensitive, it may be necessary to limit the size of a CMG to enable efficient and effective discussions. But in normal times, resolution planning can benefit from a broader participation of relevant authorities.
All in all, the introduction of the euro has been a very positive development for the international monetary system in general, and for Switzerland in particular. We benefit from the greater transparency offered by the euro and the lower transaction costs made possible by its creation. Perhaps for the first time in history, we are surrounded by an area that shares the same monetary policy objectives as we do, namely price stability. This explains to a large extent why the Swiss franc/euro exchange rate has been relatively stable over the past five years. But the presence of a single European currency has per se also shielded third currencies - like the Swiss franc - from too much volatility in the case of dollar turbulence. At the same time, we keep the trump card of an independent monetary policy that enables us to respond very rapidly to the specific needs of the Swiss economy. Between 2001 and 2003, we have thus lowered interest rates more quickly and more decisively than the ECB. Once economic activity showed signs of recovery, we were able to gradually shift to a less expansionary stance, again well  4  BIS Review 72/2004  before any similar move by the ECB. With inflation around the one percent mark, we enjoy price stability and our interest rates lie clearly below corresponding rates in the eurozone. Thanks to enhanced stability in Europe with the introduction of the euro, a two headed international monetary system is good news for small countries.

Here, I must say, our fears proved not just to be unfounded, but the reality turned out to be much more favourable than we could have hoped for. The exchange rate between the Swiss franc and the euro ended up being much steadier than expected, in fact even steadier than it used to be against the German mark, not to mention the French franc and the Italian lira. Over the past six years, the real exchange rate has moved within a relatively narrow band little more than five percentage points wide. Except for the immediate after-September-11 period, when the Swiss franc appreciated significantly, the external value of the franc has largely reflected economic fundamentals. In fact, even the post 9/11 safe-haven effect was relatively mild compared to what we experienced in the past, during the seventies and the eighties, for instance. But vigilance is of the essence. Recent foreign exchange market developments show that in highly turbulent times the Swiss franc can come under upward speculative pressure. This may interfere with our domestic monetary strategy and can eventually trigger corrective policy actions. 4. A new international monetary order  I truly believe that one can make the case that the introduction of the euro has brought about a new international monetary order, that it has produced an element of stability that benefits many countries, not just Europe’s immediate neighbours, but nations around the globe.
The issue of measuring price stability However, this raises another issue, especially in the current context of muted inflationary pressures but ample fluctuations in asset prices: are we measuring inflation accurately? Is price stability being ensured, in the context of large movements in asset prices? Shouldn’t asset prices be taken into account when defining price stability? Up to now, this debate has focused on the role asset prices may play as leading indicators of inflation: one rationale behind this thinking may be that asset valuation is computed in a forward looking manner, and therefore asset prices embed expectations about future economic growth and future inflationary pressures. Empirical evidence gathered on such an issue tend to support the idea that some asset prices, housing prices in particular, may actually play such a role. However, this theory has to be qualified by the fact that, as I mentioned earlier, wealth effects are difficult to establish in a definitive manner. This is probably less true for the US, although this is debatable and could be discussed in this conference, but this is more likely to be true for the euro area. Moreover, there might be a danger that asset prices diverge from the CPI, as this was observed over the last few years. There might be an internal conflict here if the objective of price stability is defined by aggregating the changes in the CPI and the changes in asset prices, and this is a crucial issue since the nature of both types of prices is fairly different.

Third possible avenue: Diversify the risk management tools of financial institutions As I mentioned earlier, even the best techniques can have adverse effects when used on a standard basis and by all participants. To some degree, this is perhaps what has happened to value-at-risk based techniques, which have been, for very good reasons, massively adopted by the financial industry. Because they use more or less similar parameters and suffer from the same weaknesses – for example, they did not take market liquidity into account adequately at the time of the 1998 crisis –,  BIS Review 28/2002  5  such tools might tend to give converging signals to those that use them. They thus encourage the mimetic behaviour that I discussed previously. Of course, the fact that some market participants are more sophisticated than the average is a guarantee that standardisation will remain limited, since they will develop techniques that are little used by others. However, supervisors might help, and obviously are already helping to spread the idea that financial institutions should round out their current range of risk management tools to include extensive use of stress testing. This technique offers a better reflection of the varying situations of institutions and of the diverse perceptions that institutions have of exceptional events. The application of stress testing techniques and their results are thus inherently more diversified than those resulting from methods based on the value-at-risk approach. 3.
For example, in the securitisation market, originators need a two-layer structure to create pan-European transactions backed by well diversified multi-jurisdictional asset portfolios: first, assets must be securitised at the domestic level, and then, a pan-European vehicle backed by several domestic securitisation transactions must be set up. This is a complex procedure and incurs costs. I now turn to an important retail market, namely the mortgage credit market which represents in the EU an outstanding volume of around EUR 4 trillion. The lack of integration manifests itself here in numerous ways. In no national market can borrowers access the full range of mortgage products. Moreover, only a negligible portion of European mortgage credit is granted across borders, and the techniques for loan origination and servicing differ substantially from country to country. More than half of mortgage lending is still financed by retail deposits, although in recent years capital market instruments, such as covered bonds and residential mortgage backed securities, have gained in importance. These are important asset categories that can also be used as collateral in the Eurosystem’s monetary policy operations. Nevertheless, they still exhibit a high degree of heterogeneity across countries due to differences in their legal, tax and regulatory framework. BIS Review 18/2005  3  Given the size of the mortgage credit market, the costs incurred through the lack of integration cannot be ignored.

The constraints imposed by such a financial infrastructure, and the inadequacies and inefficiencies attendant thereto, provide key justification for the development of the capital market which will play the lead role for mobilizing domestic and foreign investment, as well as engendering low cost, efficient, financial intermediation. While in our financial sector development we have taken steps to improve the payments system, supervision of banks, strengthening their capital base, and enhancing efficiency in general, we have also put strong emphasis on ensuring the emergence of a comprehensive financial sector, that will meet the demands of an emerging market economy such as ours. BIS Review 107/2007  1  In the process of developing the capital market, we have worked with private sector and external development partners, especially the First Initiative and the Commonwealth Secretariat, to put in place a robust legal and regulatory framework that will facilitate the process. Through the Resident Consultant provided by the First Initiative, we have defined the system of regulations that would guide the operations of the capital market, and the stock exchange in particular, in all facets of its operations. We have ensured that these are consistent with acceptable international standards, and I can now confidently say that our stock exchange will operate with adequate safety and protection of the interests of the investing public. No one therefore should entertain any fears in transacting business through our stock market. The process of developing the legal framework has been participatory and transparent.