samchain/econo-pairs-v1 huggingface dataset:
Since 2008, we have seen the Fed come to the rescue of the US commercial paper market and the mortgage backed securities market; we have seen the Bank of England purchase in the space of a few months GBP 200 billion in government securities, representing around 15% of the United Kingdom’s GDP; the Eurosystem, for its part, has conducted massive oneyear refinancing operations with euro area banks and has kick started the covered bond market, via its EUR 60 billion purchase programme. Next May, it also start intervening in the government securities market. This calls for further clarification in the light of my earlier analysis because its motives are highly illustrative of the interactions between markets and central banks. What was the situation in May and how has it changed?   Price stability was not and is still not in question in the euro area; following a period in which prices declined, largely due to developments in energy prices, we are steadily returning to a configuration that is more consistent with our definition of stability, i.e. price increases below, but close to, 2%. However, all indicators have shown continuously, since the beginning of the year, that the upside risks to inflation are very limited. The Commission published for example in early May euro area inflation forecasts of 1.5% for 2010 and 1.7% for 2011. ECB inflation forecasts published in early September project inflation at 1.6% in 2010 and 1.7% in 2011.

Each situation may call for an appropriate response and we now know that this includes massive and direct interventions in markets, to some extent similar to foreign exchange interventions. It is plain that this type of action has no constraints in terms of amounts or timeframes; such amounts are unlimited because central banks can absorb the liquidity injected and they inherently have no liquidity problems in their currency. Moreover, I believe that the fact that central banks have shown that they are able to take such action is in itself likely to limit the emergence of asset price disruptions by limiting speculation. Some recent modest purchases under our Securities Market Programme have acted as a strong reminder that we were still monitoring very closely the evolution of key markets. But this does not mean that markets and market participants should always expect central banks to make such interventions. Similar to its lender of last resort function, the role of buyer of last resort that central banks can take on must not extend to insolvent issuers and must not, at the risk of causing a very dangerous moral hazard, be systematic each time a problem arises. Such interventions must result, as rapidly as possible, in a return to normal market functioning, which is the only way to ensure a truly efficient allocation of capital and which enables us to determine economic agents’ expectations. Thank you very much for your kind attention.
–  The transmission of monetary policy can be affected by risk appetite, and can itself affect risk-taking behaviour, domestically and globally. We need to be alive to that in forecasting the path of nominal demand, and in assessing global liquidity conditions. –  We also, therefore, need macroprudential regimes to ensure that these mechanisms do not lead to stability-threatening indebtedness or otherwise endanger the resilience of the financial system. We need, in particular, to be ready to contain private sector liquidity creation even when it is not driving excess nominal demand growth. That will amount to arresting occasionally the expansion or leverage of the banking system and shadow banking sectors. –  Given its special role in international finance, the UK owes a special responsibility to the rest of the world to maintain the safety and soundness of the UK-resident financial system. It is therefore very welcome that the IMF has reached precisely that view in its new work on Spillovers.26 The Fund must ensure that we stick at it. –  Reciprocally, the Fund needs to go back to the Draghi Report and incorporate its lessons into Article IV and FSAP reports. –  As the Draghi Report stressed, we must try to identify and remove microeconomic incentives that distort risk-taking behaviour into dangerous channels. And given the interconnectedness of global finance, we – especially in the UK – must be alert even to such distortions elsewhere. US housing finance was a domestic system whose structure led to problems with global spillovers.

It means being ready temporarily to raise regulatory requirements above their minimum level when risks from the economic and financial environment exceed anything remotely calibrated into the standards that apply in broadly normal conditions. And it means promptly relaxing those extra requirements once the risk to stability has passed. This is a massive step. No one is pretending that the policy community knows how to cast it in terms of a numerical target or a uniquely useful set of indicators, against which society can monitor us. And that underlines the importance of Parliament itself approving the instruments granted to the FPC, and of our being sufficiently transparent to enable public scrutiny of and debate about our analysis and policy decisions. The Bank/FSA Discussion Paper on macroprudential instruments published last December was a contribution to that.25 Back to current account imbalances: they do matter But that is not all that we, policymakers, should be modest about. If, as I believe, macroprudential policy can prospectively fill a gap, we must not pretend that it can be a cure for everything. Even if we had avoided the worst consequences of seriously suboptimal gross capital flows – a badly overlevered banking system dependent on flighty wholesale funding – there would still have been the problem of unsustainable global current account imbalances. Whether the eventual adjustment would have been disorderly and how costly is hard to tell.
Neither the EU, nor, as a matter of fact, Switzerland can be interested in such a development. Like any other country in Europe, Switzerland has a vital interest in EMU becoming a success. Switzerland’s economy is closely linked to the economy of the EU. High growth in Europe is essential for a sound economic development in Switzerland, whereas a lackluster economic situation in the EU contributes to sluggish economic growth in our country. The success or failure of EMU will thus directly affect our economic well-being. In fact, not only our economic well-being, but also our ability to conduct a relatively autonomous monetary policy will be affected. Market turbulence during the transition period, uncertainties about the future monetary policy of the ECB and unfulfilled expectations about the stability of the new currency and the degree of political independence of the ECB all have the potential to create an upward pressure on the Swiss franc. An appreciating currency would make it more difficult for our export-oriented companies to compete on the world market and would increase the competition faced domestically from abroad. Should the Swiss franc appreciate to an extent that economic activities in Switzerland were severely disrupted, we would have several courses of action open to us. The Swiss National Bank (SNB) could relax monetary policy in an effort to counteract the effects of the strong Swiss franc on the domestic economy. Attractive as this response may be, its major drawback is that we would have to walk a tight rope.

Although such relative price shocks do not necessarily affect inflation, prolonged short term impacts of sizeable relative price shocks could result, for instance, from adjustment frictions in the economy. Empirical studies for the euro area have tended to suggest a small dampening influence of trade openness on prices in the early part of this decade, though globalisation’s contribution to recent movements in commodity prices – particularly energy and food – has had a significant offsetting upward impact on prices. This warrants close monitoring, in particular given the risks of second round effects. In case of food related commodities, it also underlines the importance of efficient supply side adjustment in agricultural commodity markets. A separate but nonetheless potentially equally important channel through which globalisation can affect inflation involves the indirect price impact of increased competitive pressures, with two main aspects. First, in principle it could contribute to compressing firms’ price-cost markups as competitive forces resulting from trade openness would depress profit mark-ups of domestic firms competing with international firms. In practice, however, such effects have been hard to identify and, indeed, aggregate profitability has remained high. Second, in principle competition associated with globalisation could alter the responsiveness of prices to costs or measures of economic slack, or imply a greater role for foreign conditions in the inflation process.
In parallel, a “run on repo”, triggered by increased haircuts on collateral to guard against counterparty risk, pushed the shadow banking sectors in advanced economies to collapse. In the euro area, the sovereign debt crisis compounded these problems, causing some markets to splinter along national lines. Global reforms address the fault lines that caused this fiasco. New global standards for liquidity regulation are now in place including the Liquidity Coverage Ratio and Net Stable Funding Ratio. Bank capital standards now take into account exposures to shadow banks, including step-in risk, and through-the-cycle margining prevents Minsky cycles in secured lending. 1 2  See https://www.fsb.org/wp-content/uploads/R191118-1-1.pdf. See https://www.esma.europa.eu/sites/default/files/library/esma50_157_2025_asr_derivatives.pdf. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  These reforms are transforming banks’ approach to liquidity management and building the resilience of the system as a whole. For example, liquid assets – relative to liabilities that can readily run – are tenfold higher than before the crisis. However, the recent volatility in US dollar repo markets suggest there are still frictions that need to be addressed. Contrary to expectations, banks did not step into the market to lend cash, viewing the profit opportunity to be insufficient to offset the impact on perceived regulatory liquidity requirements. The Federal Reserve’s open market operations have since calmed the market, but term repo rates remain elevated, as dealers are pricing in a higher likelihood of similar spikes in future.

We at the ECB and other central banks have reacted swiftly, flexibly and decisively. The ECB took the lead with some exceptional decisions as early as 9 August 2007. We have, since then, modified our operational framework and used an exceptional set of non-standard policy tools. These tools, combined with the bold action taken by euro area governments over recent months, have played an essential role in preventing a collapse of the financial system and in bolstering confidence. I would like to emphasise that despite this upheaval and our exceptional measures, our objective remains unchanged: to preserve price stability over the medium term, and that’s what guides our policy. In so doing, we support the conditions for financial and economic stability. The crisis has not changed this objective. Interest rates As regards interest rates, the ECB’s Governing Council has reacted promptly and decisively to the intensification and broadening of the global financial turbulence. We have lowered our  2  BIS Review 66/2009  key interest rate by 325 basis points since October 2008. This is the largest cut ever decided over such a short period in Europe. These moves were fully in line with our strategy. The upside risks to price stability have indeed receded considerably over that period due to the sharp fall in oil and other commodity prices, and the abrupt slowdown in economic activity. As price stability is the needle in our compass, we took account of the easing of inflationary pressures and lowered interest rates.
At the same time, we have a very close co-operation with our colleagues on the other side of the Atlantic, which proved to be useful precisely in the times we are living. The international meetings, in particular the global economy meeting of central bank governors and the G20, provide regular forum for a thorough and open discussion between the participating  2  BIS Review 18/2009  Governors, particularly with Governor Zhou, who plays a very important role in these meetings. China Finance: To what extent do you see the need to reform the international monetary system and the global financial regulatory system in the light of lessons learned so far from the ongoing financial crisis? Trichet: The current crisis stands out because it affects the heart of the global financial system. Its root cause was a wide-spread underassessment of the quantity of risks and marked an undervaluation of the price of risks in the global financial system, especially in the most advanced economies. One of the reasons why this could happen was the widely held view that regulation should not stifle financial innovation and that markets knew best and could – for the most part – regulate themselves adequately. The turmoil has shown that this attitude was deeply misleading. When the turmoil set in, many financial institutions realised that their risk management systems were not as reliable and robust as they had believed them to be and, indeed, should have been.

Bilateral trade balances that are not in equilibrium are not a problem per se, and are instead much more an expression of the respective parties focusing on their own strengths. A country’s deficit with one trading partner can be financed through its surplus with another. That said, I do not want to paint too rosy a picture of the current trading system. This brings me to the second facet of the concept of ‘fairness’. The accusation that not all countries play by the rules of global trade is not without justification. Chart 3 shows that the number of tariff and non-tariff barriers to trade has increased again of late – with the latter often opaque and thus potentially even more damaging than customs duty. Examples include not taking due account of the principle of reciprocal market access or the protection of intellectual property, or distorting the free exchange of goods and services by way of subsidies. From this perspective, there is a valid point in calling for fairness. After all, international trade is in fact only fair if everyone plays by the rules of the global trading system. I will come back to this point later. No country wins a trade war The import duties recently imposed or increased by the US on certain goods have already prompted the first counteractions from the trading partners concerned. Were the spiral of protectionist measures and retaliation to continue, this could develop into an all-out trade war, which would have drastic consequences for the global economy.
We regularly meet with our counterparts from all over the world at the headquarters of the Bank for International Settlements (BIS), not far from the WWZ, to discuss the challenges facing us. These challenges have always revolved around monetary policy and financial stability. The increasing digitalisation of the financial sector opens up another area for discussion. Against this backdrop, the BIS announced a few months ago that it was launching an Innovation Hub. The aim of the Hub is to study technological developments with the potential to improve the functioning of financial markets and support central banks in fulfilling their mandates. Furthermore, it will provide a network for central banks to exchange knowledge on innovations. One of the Hub’s three regional centres will be in Switzerland, and will be operated jointly with the SNB. The word ‘innovation’ brings me to the subject of my speech tonight. Issuers and types of money Ladies and gentlemen, how do you pay your bill in your favourite restaurant? With cash, card or smartphone? We already have various payment options at our disposal, and these are typically based on cash or book money. In the not-too-distant future you may also be able to pay using a ‘digital token’. Money in the form of a token? What’s that, you may ask? Before we get into the detail, let’s first remind ourselves of the similarities and differences between the various types of money. Given that Basel lies at the intersection of three countries, your favourite restaurant might well be in France or Germany.

Whether or not a banking licence is required, stable coin issuers must abide by certain regulations just like any other financial market participant. These range from investor and data protection to rules on combating money laundering and terrorism financing. As you see, ladies and gentlemen, stable coins present many regulatory challenges, which in turn require close cooperation between the various authorities. This is particularly true of cross-border projects like Libra. In addition to the regulatory issues, there is the question of whether stable coins might influence the effectiveness of monetary policy. If Swiss franc stable coins were to proliferate in Switzerland, this would have no immediate impact on the effectiveness of our monetary policy. In such a scenario, the Swiss franc would remain the relevant currency. The stable coins pegged to Swiss francs would simply be another Swiss franc-denominated form of money alongside bank deposits and cash. As long as prices, wages and loans are set in Swiss francs, the SNB can influence incentives for savers and borrowers via its monetary policy and thus ensure price stability over the medium term. However, if stable coins pegged to foreign currencies were to establish themselves in Switzerland, the effectiveness of our monetary policy could be impaired. How close stable coins will get to good money and what additional benefits they will offer versus traditional types of money remains to be seen. What matters is that the various book and token money providers operate under identical competitive and regulatory conditions.
It is also vital for sustaining public support for open and global financial markets. The FMSB is not self-regulation. The laws and regulations governing conduct apply and will continue to be enforced. But the official sector has an important role to play in supporting such market-led initiatives, helping to solve coordination problems and enabling the private sector to come together to raise standards and share best practice. An excellent example of this approach is the development of a single global foreign exchange code being written through a partnership between 16 central banks and market participants in both advanced and 13  Further information on the FMSB, its membership and draft guidance can be found at: http://www.fmsb.com/ 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  emerging economies. 14  This will be the first time that the approximately $ trillion per day foreign exchange  market will be governed by a single code of conduct. Sections of the global foreign exchange code covering ethics, information sharing, execution, confirmation and settlement, including an update on how adherence to the code will be promoted, was released in May 2016. The full text of the code, including additional sections on governance, risk management and compliance, is on track for publication in May 2017. The nature of conduct risks will of course evolve over time and the official sector needs to stay on the front foot.

http://ssrn.com/abstract=2783067 European Central Bank (May 2016), ‘Financial Stability Review’, https://www.ecb.europa.eu/pub/pdf/other/financialstabilityreview201605.en.pdf?e1a2bef79ed901d8ceaee004 f2fcecdd Financial Stability Board (2015), ‘Implementing the FSB Principles for Sound Compensation Practices and their Implementation Standards: Fourth Progress Report’, http://www.fsb.org/wp-content/uploads/FSB-Fourth-progress-report-on-compensation-practices.pdf Rouch, David (2016). Written Standards and the Social Licence for Financial Markets. http://ssrn.com/abstract=2850885 Seagrave, Sterling (1995), ‘Lords of the Rim: The Invisible Empire of the Overseas Chinese’, New York, Putnam's Sons. 8  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  8
[2] This speech builds on the recently published ECB Discussion Paper “Money Markets, Central Bank Balance Sheet and Regulation”; see Corradin, S., Eisenschmidt, J., Hoerova, M., Linzert, T., Schepens, G. and Sigaux, J.-D. (2020), “Money Markets, Central Bank Balance Sheet and Regulation”, ECB Discussion Paper No. 2483. [3] A non-bank financial institution is a financial institution that does not provide the traditional banking intermediation role, in particular it does not accept demand deposits from the public. Examples of non-bank financial institutions are investment funds, money market funds, central clearing counterparties (CCPs), insurance companies, pension funds and hedge funds. [4] There are several channels through which money market conditions affect lending conditions. For example, the conference paper by Corbae and Gofman (2019) points out one novel channel, namely that interbank markets provide a channel for banks to collude in the market for business loans; see Corbae, D and Gofman, M. (2020). “Interbank Trading, Collusion, and Financial Regulation”, Working Paper. Altavilla, Carboni, Lenza, and Uhlig (2019) document that the cross-sectional dispersion in unsecured interbank money market rates significantly raises lending rates banks charge to firms, with a peak effect of around 100 basis points during the global financial crisis and the euro area sovereign debt crisis; see Altavilla, C., Carboni, G., Lenza, M. and Uhlig, H. (2019), “Interbank Rate Uncertainty and Bank Lending,” ECB Working Paper No 2311. [5] See Heider, F., Hoerova, M. and Holthausen, C. (2015), “Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk”, Journal of Financial Economics, 118(2), pp. 336-354.

The regional cooperation agreement to be  2  BIS central bankers’ speeches  signed at the ShamGen Banking Conference will complement these agreements and enhance their effectiveness. The Turkish Banking Sector, which was restructured following the 2001 economic crisis, managed to overcome the global crisis with no apparent damage and verified its outstanding resilience. Turkish banks are also interested in venture opportunities in the Middle East and will contribute substantially to the betterment of the banking systems of the region countries. Moreover, I am of the opinion that also the participation banks in Turkey operating through the interest-free system will not only contribute to but also benefit from cooperation among these countries. Intended as a long-term formation, the common market calls for not only political and economic, but also cultural cooperation. The fact that it is easier to establish commercial and economic cooperation between closer cultures is supported by both history and academic studies. Therefore I believe, it is significant that this conference is organized in İstanbul, a city that has hosted a great diversity of cultures in the past, as well as being the European capital of culture in 2010. At the end of this conference, a city tour will be organized for our guests who would like to get to know İstanbul better. I hope that you all enjoy this beautiful city. BIS central bankers’ speeches  3