samchain/econo-pairs-v1 huggingface dataset:
(a) Bank of England lending operations shown here: Indexed long-term repo, Contingent term repo facility, US dollar repo operations, Liquidity Facility in Euros, Term Funding Scheme and Term Funding Scheme with additional incentives for SMEs. Bank of England asset purchases shown here: Asset Purchase Facility and Covid Corporate Financing Facility. (b) ECB lending operations: Lending to euro-area credit institutions related to monetary policy operations denominated in euro. ECB asset purchases: Securities held for monetary policy and other purposes. (c) Federal Reserve lending operations: Repurchase agreements, Loans and Net portfolio holdings of TALF II LLC. Federal Reserve asset purchases: Securities held outright. Section of chart lying below the zero line from mid-2020 reflects a decline in repo outstanding relative to end-February. Despite their success in the unparalleled circumstances of Covid, these actions provide only limited guidance as to how central banks might best respond to future instances of market dysfunction driven by the more structural trends I outlined at the start of my remarks:  -  They were one-way purchase operations of relatively long-duration assets – so they were not preprogrammed to unwind or self-liquidate when core market functioning returned, as it did by the late spring of 2020. Central banks were ‘buyers of last resort’ more than ‘market makers of last resort’.

Lucas Papademos: The role of the ECB in financial crisis management Speech by Mr Lucas Papademos, Vice-President of the European Central Bank, at the conference on “The cost of the financial crisis: Planning an exit strategy”, organised by the Bank of Greece and the Hellenic Observatory at the London School of Economics and Political Science, Athens, 27 May 2009. * I. *  *  Introduction  “Τα πάντα ρεῖ” (all is in flux) Heraclitus asserted about 2500 years ago. His aphorism is truly relevant to our understanding and assessment of the financial and economic developments over the past two years. The financial crisis has evolved over time, and so have the policies employed to counteract its impact as well as the public debate about its causes and consequences. A year ago, gatherings such as this one would have been dedicated to identifying the underlying sources and the other contributing factors of the turmoil in financial markets. Six months ago, as the crisis deepened and broadened after the collapse of Lehman Brothers, public policies and discussions concentrated on how to restore confidence in the banking system and deal with the significant weakening of economic activity worldwide. More recently, the attention has progressively focused on the new economic and financial landscape that is likely to emerge after the crisis, and on devising “exit strategies” from the extraordinary policies currently pursued.
Second: Would it be possible for a central bank to assume the role of a professional investment manager? Third: How could this activity be organised within the central bank? Norges Bank’s Executive Board, under the chair of former central bank governor Kjell Storvik, chose to take on this task. The Bank solved the two other challenges by delegating management to a separate unit for investment management – Norges Bank Investment Management or NBIM. A key aim was to establish NBIM as a business unit with clear financial objectives. Eventually, Chinese walls were erected between NBIM and the rest of the Bank. NBIM does not participate in monetary policy deliberations and does not have access to the Bank’s work concerning other matters. 6  National Budget for 2011. BIS Review 145/2010  3  In winter 1997, Norges Bank wrote in a letter to the Ministry of Finance that the investment horizon implies that a substantial share of the Fund – no less than 30 per cent – should be invested in the international equity market. In the Revised National Budget for 1997, the Ministry considered this matter and set the allocation to equities at 40 per cent 7 . In the correspondence between Norges Bank and the Ministry, there is also support for the fiscal rule’s assumption of a real return of 4 per cent with an equity allocation of 40 per cent. In 1998, the Fund started investing in listed equity in 21 countries, all of them featuring a fairly well developed financial market.

Lim Hng Kiang: Singapore’s insurance industry – investing in future growth Congratulatory remarks by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of Singapore and Minister for Trade and Industry, at the opening of the AXA University Asia Pacific Campus Singapore, 8 April 2009. *  *  *  Mr Henri de Castries, Chairman of AXA Management Board and CEO of AXA Group Distinguished Guests Ladies and Gentlemen I am delighted to be here with you this evening to commemorate the opening of the AXA University Asia Pacific Campus. This establishment of a full-fledged corporate training campus here reflects AXA Group’s continued commitment to people development, in Asia and to Singapore. We welcome the leadership and foresight demonstrated by AXA in investing in future growth of the industry. This investment is especially significant given the current difficult economic environment. Allow me to first comment on global economic and financial developments. Overview of economic and financial developments in the world, including Asia As you know, global financial markets are going through very turbulent times. The sharp downturn in global economic activities has taken many by surprise. Some say that this current macroeconomic condition is like the perfect storm. Sharp tightening of credit conditions, loss of confidence in banking and capital markets and sharp declines in output have resulted in a gloomy outlook for the global economy with projected growth of a meagre ½ percent for 2009. This is probably the lowest rate since World War II.
A stronger krone also dampens exports and reduces profitability in Norwegian business and industry. The effect on the exchange rate of a change in interest rates will vary as themes and sentiments shift in the foreign exchange market. The expectations channel: We believe that expectations play an important role when prices and wages are set. Expectations concerning future inflation and economic stability have considerable impact, not least in the foreign exchange market. Inflation expectations also influence wage demands and have an effect when companies adjust their prices. It is difficult to be precise about how expectations are formed. Confidence in the inflation target may provide an anchor. Past inflation rates may also influence what we think inflation will be in the future. There is thus an interaction between inflation expectations and inflation. If there is confidence in monetary policy, expected inflation in the medium term will be close to the inflation target. This contributes to stabilising inflation around the target. It is thus important for the central bank to ensure that households, companies, the social partners and financial market participants are confident that inflation will remain low and stable. Let me introduce the concepts of the “neutral rate” and the “long-term equilibrium rate”. Both should be seen as real rates, that is nominal interest rates adjusted for expected inflation. The neutral real interest rate is defined as the rate that does not in itself result in an increase or a reduction in price and cost inflation in the economy in the course of a business cycle.

The interest rate is also the price of money – the price we pay in order to have liquid holdings and the compensation we receive for storing our savings in less liquid forms. The interest rate is also used as an instrument in economic policy. Setting the interest rate to achieve a monetary policy objective, often price stability or low and stable inflation, is usually the responsibility of the central bank. This is also the case in Norway. Low and stable inflation provides the economy with a nominal anchor, and is the most important contribution monetary policy can make to sound economic developments in the long term. This contributes to increased predictability for those who take decisions about saving and investment today, although the result of those decisions also depends on how the economy develops in the future. In its conduct of monetary policy, Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. Flexible inflation targeting builds a bridge between the long-term objective of monetary policy, which is to keep inflation on target and provide an anchor for inflation expectations, and the more short-term objective of stability in the real economy. Monetary policy influences the economy with long and variable lags. Norges Bank sets the interest rate with a view to stabilising inflation at the target within a reasonable time horizon, normally 1–3 years.
Starting in the autumn of 2008 and continuing into the early months of 2009, demand – in the UK and globally – weakened very sharply. Consumers and firms held back spending plans in the wake of the massive negative confidence shocks associated with the events surrounding the collapse of Lehman Brothers and the knock-on effects on the rest of the financial system. Along with the rest of the MPC, I strongly supported the decision to reduce interest rates from 5% to 0.5% between October 2008 and March 2009, and to inject extra money into the economy through Quantitative Easing. The bulk of this money injection £ of the total £ was agreed by the time of the August 2009 Inflation Report, which was published just under a year ago. Though that Report looked forward to a recovery in the economy, very little economic data available at that time pointed in that direction. Rather, the economic data last summer were telling us how sharply the economy had contracted in late 2008 and the first half of 2009 both at home and abroad, and how sharply unemployment had risen as a result. A strong theme underpinning the analysis of both the May and August Inflation Reports last year was that UK inflation was expected to be pushed significantly below target by a large margin of spare capacity.

5 The evidence from the Bank of England’s Agents and recent employment surveys is that the labour market in the UK has stabilised and that labour demand in the private sector may have already started to pick up. Companies also seem to have adjusted quickly to a lower level of demand and activity in the recession, and the most recent surveys do not point to an unusually large margin of spare capacity remaining within firms. For example, the latest CBI survey shows 62% of manufacturers reporting some spare capacity – which is virtually in line with the average for the decade before the financial crisis. 6 The evidence on wages and prices is also consistent with the view that spare capacity is not exerting as much downward pressure on inflation as the MPC expected last summer. In the manufacturing sector, underlying wage growth is back up to the 4–5% level already, though is more subdued in the services sector. And after quite widespread pay freezes last year, the latest pay settlements data from Income Data Services show that the most popular range for pay settlements is currently 2–3%, which is where four out of ten pay settlements are now being struck. If the recovery continues and headline inflation remains relatively high, there may be a further upward drift in pay growth in the private sector, offsetting some of the downward pressure on wage growth from the public sector.
The Financial Stability Board’s Global Monitoring Report on Non-Bank Financial Intermediation 2018 shows that collective investment vehicles with features that make them susceptible to runs represent 71% $ trn) of the FSB’s risk-based narrow measure of non-bank financial intermediation. 17 See the November Financial Stability Report for a discussion of the similarities and differences between the current leveraged lending market and sub-prime lending in the run up to the crisis. Chart F.8 also illustrates which market actors are holding the collateralised loan obligations. 18 See FSB Plenary Press Release 19 IIF Global Debt Monitor. 16  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  As published by the Bank in the past, the rate of growth and level have passed the points where other economies, advanced and emerging, have experienced sharp corrections in the past (Chart 1). Chart 1: China’s credit boom in a historical context Per cent of GDP 300 Danish financial crisis 250 Japan asset price bubble China credit boom Thailand (Asian crisis)  200 150 100  Spanish housing crash US subprime crisis  50 0  1980  1985  1990  1995  2000  2005  2010  2015  2020  Sources: BIS and Bank of England. The Chinese authorities have, since the start of 2017, taken material policy measures to de risk the financial sector and bring the growth rate of debt into line with the growth rate of nominal GDP.

The second risk that may arise after we have left the EU, is the related but perhaps more prosaic issue of the flexibility of the UK’s regulatory framework and allocation of responsibilities within it – the division of tasks between Parliament, Government and the regulatory authorities. Much of our financial sector legislation and regulation has been made at the EU level. This has increasingly taken the form of extremely detailed EU primary and secondary legislation directly applicable in Member States.4  This approach has been justified as necessary in the EU by the need to prevent divergences between member states. The cost, however, as some have observed, is an over complex and rigid regulatory framework.5 As a preparatory step for Brexit, Parliament has ‘onshored’ EU legislation and regulation and also the allocation of responsibilities that lie behind it. At some point, post Brexit, we will, I think, need to address this rigidity and hard wiring of detail to ensure we have a coherent, effective and flexible regulatory system with appropriate accountability. How we do that will have an impact on how we address risks, at firm and at system level, in a fast changing financial system. Financial stability post-Brexit With that nod to the future, I will leave Brexit - for today at any rate – and turn to the examination question you have set for today – financial stability post Brexit. I would like to focus on the question of debt.
Europe has profited a great deal from this integration: it is estimated that the Single Market raises GDP in the EU by around 9%, taking into account both the direct trade and competition effects. [7] But as countries become more interlinked, they also become more exposed to volatile capital flows, unfair competition or discriminatory actions – and this necessitates greater protection for their citizens. That protection, which EU countries have created together, has allowed them to garner the benefits of openness while limiting, to some extent, its costs. The EU’s common structures and institutions contain spillovers, ensure a level playing field and prevent unjust behaviour – in other words, they respond to the needs of citizens and allow countries to exercise sovereignty. Thus the Council and the European Parliament set common rules for the whole EU, the Commission ensures they are observed, and the European Court of Justice (ECJ) provides for judicial protection if they are violated. In the euro area, European banking supervision and the Single Resolution Mechanism help to contain the effects of financial instability. In this interconnected environment, seeking independence from EU institutions presents complex trade-offs. Countries either have to accept rules decided by others to ensure continued access to the European market, which gives them less control over decisions that affect their citizens’ interests; or they have to disentwine themselves from their most important trading partners, which gives them less control over their citizens’ welfare.

William C Dudley: Remarks at panel discussion on fiscal challenges Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at panel discussion at 2012 US Monetary Policy Forum, sponsored by The Initiative on Global Markets, University of Chicago Booth School of Business, New York City, 24 February 2012. *  *  *  It is a pleasure to have the opportunity to speak here today on a panel with Charles Plosser of the Federal Reserve Bank of Philadelphia, and Juergen Stark, formerly of the European Central Bank. Our topic today is fiscal policy–for central bankers always dangerous waters to swim in. I will focus my remarks on the United States as others are better qualified to comment on the situation in Europe and elsewhere. To start, let me stress that it is essential that the United States put in place a credible program of medium-term fiscal consolidation that addresses our sizeable and growing structural deficits in a manner that is consistent with supporting ongoing economic recovery. Today I am going to discuss two specific issues relevant to U.S. fiscal policy. First, I am going to highlight the importance of taking the increase in debt service costs into account that will take place when economic conditions permit the normalization of monetary policy. I will argue that we are in an unusual period in which net interest expense is temporarily depressed.
And a strong and stable European economy is probably of greater importance to the world at large than is any particular level for the euro’s exchange rate. So, the euro has arrived. It has already made an impact on financial markets and trade, and that impact is likely to expand over time. We disregard it at our cost. And we should focus on the longer-term implications of the euro rather than dwell too much on its short-term vicissitudes. Finally, in Hong Kong we should perhaps be watching with special interest the evolution of the euro and the way in which the associated macroeconomic challenges within Euroland are tackled, to see what lessons might be put in store for a future generation of central bankers in this region, who might at some stage decide that the time had come to launch a similar initiative. BIS Review 53/1999  4

This means that the interest rate should be set so that monetary policy mitigates the risk of a buildup of financial imbalances. Normally, the key policy rate cannot achieve several objectives simultaneously. In the case of conflicting objectives, the choice of interest rate path will involve a trade-off between different considerations. If monetary policy only took into account the low level of inflation, the key policy rate would be rapidly reduced and kept close to zero for a good while. Inflation might then pick up faster, partly as a result of a weaker krone. In the light of the trade-off against other considerations, however, the Bank does not want to accelerate the pace of inflation. The result would be a pronounced impact on output and employment and increased risk of a buildup of financial  BIS central bankers’ speeches  5  imbalances. A prolonged period of low interest rates may increase the risk that debt and asset prices will be driven up to levels that are unsustainable over time. When weight is also given to the two other criteria, the interest rate path therefore becomes higher even though the level of the key policy rate is low from a historical perspective. The Norwegian economy is well poised to face new shocks and challenges. While many of our trading partners are struggling with low growth, high unemployment and mounting government debt, the Norwegian economy still features buoyant activity, low unemployment and government budget surpluses.
Finally, I would like to know about the dynamic properties of the new FCI. Are particularly high (expansive) readings dangerous and should they be taken as suggestive of asset bubbles? Should the Federal Reserve try to prevent such occurrences because loose financial conditions precede episodes of financial instability? In this respect, when financial conditions become unusually expansive, is the fed funds rate the right tool to use to constrain or counteract such expansiveness? Or would it be better to use macroprudential tools such as leverage limits or loan-to-value requirements on residential real estate to keep financial conditions from becoming unusually expansive in the first place? I could imagine circumstances in which macroprudential tools might be used to tighten up the relationship between the fed funds rate and financial conditions. Would the use of such tools be helpful in achieving greater macroeconomic stability? At this stage, there are many more questions than answers. I would strongly encourage the authors and others to continue their work on financial conditions and in exploring how developments in the financial sector influence both the real economy and monetary policy. The financial crisis has demonstrated that financial market developments matter greatly. The paper successfully makes the case that it would be useful to have a good set of summary statistics to serve as benchmarks to keep track of such developments. It also would be useful to have a better understanding of how shifts in financial conditions should be considered in the ongoing conduct of monetary policy.

There are a number of reasons that a financial conditions framework is likely to be useful when evaluating the economic outlook and the conduct of monetary policy. Most important, monetary policy works its magic through its effect on financial conditions; it does not operate directly on real economic variables. That is because the level of the federal funds rate influences other financial market variables such as money market rates, long-term interest rates, credit spreads, stock prices and the value of the dollar, and it is these variables that influence real economic activity. 1 This means that if the linkage between the fed funds rate and this broader constellation of financial indicators is not stable or completely predictable, then knowing what is happening to the fed funds rate is not sufficient to predict economic activity. The instability of the linkage between the fed funds rate and financial conditions indicators means that these indicators provide additional information about real activity and also are relevant in deciding the appropriate fed funds rate target. In contrast, if the transmission mechanism from the fed funds rate to financial conditions and onward to real economic activity were completely predictable, then there would be no need to focus on financial conditions as an intermediate target variable. The level and path of the fed funds rate matters, but it also matters how this gets transmitted to the real economy through the financial sector.