samchain/econo-pairs-v1 huggingface dataset:
But the analysis implies that the optimal policy rule – defining how the policy rate should respond to economic developments – does not change if and when the degree of uncertainty in the economy increases. My impression is that this result did not sit comfortably with monetary policymakers. And – as is often the case in the academic literature – a result proving something did not matter proved to be the catalyst for a research agenda seeking to demonstrate that it did. Engineering again provided some of the inspiration for this research programme. But different strands of the engineering literature were taken up, which – when filtered through the macroeconomic lens – offered different implications for monetary policy. One strand of research developed from so-called Brainard uncertainty.13 If uncertainty entered the system via the parameters of the economy, rather than as shocks to the economy, then the consequences were different. For example, if the slope of the Phillips curve governing the relationship between inflation and unemployment were uncertain, then the Brainard view implied that the monetary policy response should be attenuated relative to the case when such uncertainty were absent. And the greater the uncertainty about the slope, the greater the attenuation required. The intuition behind this result is reasonably straightforward. Uncertainty about the slope of the Phillips curve introduces scope for the monetary policy response to any specific shock to be mis-calibrated. That mis-calibration threatens to introduce additional volatility into the inflation outlook beyond that created by the shock itself.

Second, I worry that taking unusually large policy steps may validate a market narrative that Bank policy is either foot-to-the-floor on the accelerator or foot-to-the-floor with the brake. This narrative was fuelled by the (perhaps necessarily) activist responses to the onset of global financial crisis and pandemic.26 It is not unique to the UK. In my mind, the perceptions underling this narrative may help to explain both markets’ reluctance to price in policy tightening in the middle of last year and the subsequent relatively rapid steepening of the money market yield curve of late as central banks have embraced the need to address inflationary pressures. And such perceptions can shape reality. If such swings in market sentiment and expectations were to weaken central banks’ ability to steer the market rates of most relevance to spending and investment decisions, then the transmission of monetary policy will be at risk. Of course, there may be occasions where aggressive monetary policy actions are necessary. Recent history is littered with them: the global financial crisis and onset of the pandemic are cases in point. I would certainly not wish to rule out changes in Bank Rate of more than the usual 25bp in all circumstances. 13  All speeches are available online at www.bankofengland.co.uk/news/speeches  13  Retaining flexibility is important. And given the inflationary pressures we currently face, I can certainly understand why colleagues on the MPC voted for a 50bp hike last week.
In other words, a central bank can run the risk of being insolvent, even when it has been successful in maintaining the stability in the value of its currency. The insolvency risk of a central bank is less obvious, because of the very nature of a central bank. A central bank, even if its capital is negative and its currency liability is not matched by an equivalent value of foreign assets or valuable domestic assets, could still continue to be in business unlike a private organisation. In the case of a private organisation, if the net-worth is negative, it has to be re-capitalised as an urgent need. If it does not happen, it cannot operate as a going concern and has to be liquidated on the ground of insolvency. However, a central bank can still operate with a negative net-worth, by continuing to issue currency as long as the members of the public are willing to accept such currency in exchange for the assets held by them. It could, in these circumstances, defer and hide the need for recapitalising itself and continue to be in operation. The fact that the insolvency of a central bank is not known to the outside world does not mean that a central bank is without problems. A central bank’s operations are smooth and faultless, if its expenses are funded out of net interest income it earns on its foreign reserves or its domestic asset portfolio.

Though this provided a temporary relief to CBP in the form of an augmentation of gross foreign reserves and a higher import cover adequacy, it forced CBP to take a huge loss amounting to 31 billion Pesos during 1983-90 on account of exchange rate risks. At the same time, the use of the foreign exchange balances so acquired for defending the currency led to an undue reserve risk by converting the foreign assets to a net negative position and forcing CBP to borrow abroad to settle its liabilities. The forward cover was provided by CBP to local corporations, especially the oil corporation, by guaranteeing the exchange rate when they borrowed abroad in the wake of the balance of payments crisis. When CBP had to relax its grip on the exchange rate from time to time due to the non-availability of reserves, the forward covers given by CBP resulted in massive losses. The total of such losses for the period 1983-90 amounted to 20 billion Pesos. 4  There have been a number of central banks which had become insolvent due to the erosion of capital. For a survey, see, Kazuo Ueda, “The role of Capital for Central Banks”, The text of Speech delivered at Japan Society of Monetary Economics on 25 Oct 2003. www.boj.or.jp. 5  A lucid description of the events that led to CBP’s insolvency is given by Mario B Lamberte in Central Banking in the Philippines: Then, Now and the Future Discussion Paper Series 2002-10, Philippine Institute of Development Studies.
Our estimates of the potential output level have increased in pace with the emergence of new information. Our best guess is nevertheless that the output gap is now positive and widening. Low inflation combined with high growth in output and employment is therefore a challenge to monetary policy. 2  BIS Review 49/2006  Even though economic growth has been strong over the past 15 years, business cycles have fluctuated. A pronounced upturn in the years from 1993 to 1998 was followed by a period of more moderate growth and a mild recession in 2002 and into 2003. Since summer 2003, there has again been a clear upturn in the Norwegian economy. Wage developments reflect and influence business cycles. Strong employment growth in the 1990s resulted in a rise in labour costs, which in turn had a dampening impact on growth. Moderate wage growth in recent years has been accompanied by a strong cyclical upturn. So far, the upturn has been marked by strong growth in output, with an ample supply of labour and unusually low inflation. For a longer period employment showed a smaller rise than in previous cyclical upturns, partly reflecting the decline in sickness absence since summer 2004 and solid growth in productivity. Employment showed a turnaround last autumn and the number of persons employed is now increasing sharply. Unemployment is falling rapidly.

It will always be difficult to know when and to what extent monetary policy should respond to a sharp rise in asset prices and a strong increase in credit growth. Our knowledge of the driving forces is incomplete. Our history is short and our experience with deregulated loan and housing markets is limited. It is difficult to determine to what extent the rise in house prices and growth in household debt can be accounted for by structural and long-lasting adaptation, by “normal” cyclical effects and by a short-term trend extension and speculative behaviour that may amplify the cyclical fluctuations when the bubbles burst. We have leaned towards the notion that debt and asset price developments may be a potential source of subsequent instability, but it is neither our ambition nor our conviction that monetary policy can control developments in these variables. Combined with the favourable supply-side developments in the economy, this has prompted us to extend the horizon for reaching the inflation target. In our communications, we have also clearly articulated that the interest rate has been unusually low and  BIS Review 49/2006  3  must gradually be increased to a more normal level. Since last autumn, this has been expressed in Norges Bank’s interest rate projections for the period ahead. From using technical assumptions or others’ assessments, we have now taken ownership of the interest rate path in our projections. This is also a means of seeking to influence household and business expectations.
In the current situation, Norwegian interest rates on a par with interest rates in the euro area would lead to instability. If monetary policy had not contributed to curbing demand, the pressure on economic resources would have led to accelerating inflation. Countries participating in EMU have gained access to a large, liquid financial market in their own currency, with low transaction costs. The risk of exchange rate losses associated with cross-border investment and borrowing in the euro area has been eliminated. This can result in substantial gains, not least for some of the smaller countries. The business sector in the euro area is taking advantage of this. The volume of bonds issued by non-financial corporations has increased substantially each year since the introduction of the common currency in January 1999. Financial markets are small and fairly illiquid in Norway compared with the euro area. Combined with the uncertainty associated with exchange rate developments, this can add a premium on the required rate of return on investments in NOK. This can in turn contribute to a higher long-term interest rate in Norway than in the euro area countries over time. In the long term, financial market participants expect Norwegian interest rates to be close to 1 percentage point higher than in the euro area.

The collateral pool for covered bonds may comprise residential mortgages or mortgages for holiday homes with a loan-to-value ratio (LTV) of up to 75 per cent, commercial property mortgages with an LTV of up to 60 per cent or loans to public sector entities with an LTV ratio of up to 100 per cent. These instruments are highly collateralised, carrying lower risk premiums than ordinary bank bonds, and are well suited to pension fund investment and other investments with a long-term horizon. According to the rules for the issue of covered bonds, the value of the cover pool is required at all times to exceed the value of the covered bonds. Both assets and liabilities are to be recorded at estimated market value. This implies that a mortgage company must add further collateral to the cover pool, for example in the form of government bonds, to replace any shortfall. An efficient bond market can handle large trading volumes without substantially affecting prices. Such a market requires instruments that are easy to understand and clear regulation. Trading should be transparent. Ideally, there should be multiple independent bidders and askers and trading volumes should be high in primary and secondary markets. Issues of covered bonds have picked up in Norway since the regulations relating to covered bonds entered into force on 1 June 2007, supported since autumn 2009 by the arrangement for the exchange of government bonds for covered bonds.
Increase in consumption and private investments, owing to the improved financing terms, confidence and private sector balance sheets, was, and is expected to continue to be, the main driver of the economy’s performance. On the other hand, the public sector has been and remains committed in the path to fiscal consolidation, whereas the external environment continues to face problems and pose challenges to the increase of Albanian exports. In the short run, the increase in consumption and private investments is sufficient to generate initial triggers for economic growth, but the long-term growth of the Albanian economy should rely more on the improvement of its competitive profile and growth of exports. Therefore, we deem that the acceleration of structural reforms has a unique role in supporting economic growth. Inflation continued to stand below our target. Internal inflationary pressures have been upward, but the fall in prices in global markets decelerated the return of inflation to target at home. The monetary policy stance of the Bank of Albania has become strongly accommodative. This policy stance aims at reducing the financing costs of the private sector, in order to sustain the return of the economy to equilibrium and of inflation to target, in the medium-term horizon. In our view, the indicators of economic activity and inflation are performing in the right direction; however, the sustainable accomplishment of targets will need time and will imply keeping low interest rates for some quarters ahead. Overall, the main indicators in banking system activity improved.

Gent Sejko: Fourth review of the arrangement with the IMF concluded Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the joint press conference with the IMF mission, Albanian MoF and MEDTTE, Tirana, 17 March 2015. *  *  *  Dear media representatives, During the last two weeks, an International Monetary Fund (IMF) team visited Tirana, to conduct, together with Albanian authorities, the fourth review of the arrangement. In Bank of Albania’s perspective, the economic and financial developments have been relatively positive. Notwithstanding the problems the Albanian economy has encountered, it has recorded growth and a range of economic and financial balances of the country have improved. The economic policies and the legal, regulatory and institutional reforms by the Albanian authorities have played a significant role in this regard. These development policies are anchored in the arrangement that Albania has with the IMF and have benefited from the credibility and financial assistance of the International Monetary Fund and World Bank. The Bank of Albania deems that the reforms that Albania has started should continue, to provide sustainable and long-term growth. I would like now to outline Bank of Albania’s opinion on the country’s economic and financial situation, and to list the priorities of our work in the framework of this arrangement. The Albanian economy posted growth in 2014, which is expected to further accelerate in 2015.
These could be generated, for example, by a failure of a large and complex financial institution through payment and settlement  BIS Review 91/2001  3  systems and securities markets. We have also considered that the traditionally expressed arguments in favour of separating prudential supervision and central banking would not be very convincing in the specific euro area conditions. For instance, the concern of conflicts of interest with monetary policy and a lack of domestic accountability should not be overstated in our setting where monetary policy is centralised and supervision remains national. Still dispersed retail markets Despite the progress I have mentioned, the markets for retail financial services are still defined quite strongly along national, or even local, lines. In these markets, for instance, interest rates are based on local competitive conditions, as you know very well. However, this does not mean that there is no international competition. The fact that this Association has now existed for thirty years is a clear sign that financial institutions have already been international for a long time. Internationalisation of retail operations Until now, branches and subsidiaries abroad have been preferred to large-scale mergers as a strategy for entering foreign banking markets. The establishment of foreign branches and subsidiaries has increased steadily in the euro area. For example, the number of foreign branches of German banks in the European Union is now 59, almost double that of 1995.

Christian Noyer: Banking in the euro area Speech by Mr Christian Noyer, Vice-President of the European Central Bank, at the 30th Anniversary of the Association of Foreign Banks' Representatives, Frankfurt, 8 November 2001. *  *  *  I am very grateful for the invitation to speak to you on the occasion of the 30th anniversary of the Association of "Foreign Banks' Representatives in Germany". Your Association has 117 members from a large number of countries. Several of the member institutions are counted among the 30 major European banks, or among banks from elsewhere with important operations in Europe. For many banks represented by your Association, the topic of my speech "banking in the euro area" is part of day-to-day business. It is also day-to-day business for the European Central Bank (ECB) and the Eurosystem as a whole, as we conduct our monetary policy operations and run the TARGET large-value payment system. The further integration of the European banking system and financial markets is in the interests of both banks and the central bank. For banks, it means the liquidity benefits of deeper and wider markets and lower costs when operating in several countries. From the central bank perspective, it enhances the efficient and consistent implementation of the single monetary policy. We already enjoy the benefits of a common euro area banking system in important respects.
The development of IFRS 17 itself saw the issuance of IFRS 4 as an interim standard, one discussion paper and two exposure drafts. Its finalisation was achieved after more than 900 meetings, 600 comment letters and 4 rounds of fieldwork and testing! I am told it is among the longest in duration, largest in scale and most complex project ever undertaken by an international standard setter – making it a tremendous feat and a testament to the intellectual capacity and perseverance exemplified by the IASB. 1/5  BIS central bankers' speeches  Even then, this 17 year journey remains incomplete as the final stretch begins with the passing of the baton from the standard setter to those involved in preparations for implementation – that is the industry. As the clock counts down to the global implementation date in January 2021, the most important implications of IFRS 17 lie ahead of us. 1. First, it will have an important impact in strengthening market discipline. 2. Second, it will improve alignment between business units and financial management and reporting. This in turn will provide more robust foundations for the growth and development of the insurance sector in this region. 3. And third, it will raise important issues around governance to ensure the integrity of financial reporting by insurers and other market participants.

Jessica Chew Cheng Lian: IFRS 17 Insurance Contracts Welcome address by Ms Jessica Chew Cheng Lian, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Joint IFRS Foundation &amp; MASB Regional Workshop “IFRS 17 Insurance Contracts”, Kuala Lumpur, 17 May 2018. * * * Good morning ladies and gentlemen and welcome to today’s Regional Workshop on IFRS 17 Standards for Insurance Contracts, jointly organised by the IFRS Foundation and the Malaysian Accounting Standards Board (MASB). Allow me first of all to congratulate the IFRS Foundation and MASB for putting this workshop together, with an impressive line-up of experts and practitioners to share their knowledge and insights on IFRS 17. We are especially privileged to have with us today two senior members of the IASB Board Mr. Darrel Scott and Mr. Amaro Gomez, both of whom have been with the IASB for more than 10 years. The strong interest in IFRS 17 and its importance both to financial systems and businesses are clear from the turnout today, with more than 250 participants from over 15 countries, representing industry players, accounting firms, national standard setting bodies and financial regulators. It is an honour for me to offer some brief remarks this morning to kick off today’s workshop. On my way here, I recalled a joke in which a lady was once told by her doctor that she would only have six months to live. Understandably very distraught, she asks the doctor for advice on what she should do.
It may also reflect the frustration of some key countries with what they see as a slow evolution of the decision-making bodies of the IMF in response to changes in the composition of the world economy and the rise of new economic powers. International policy cooperation has thus moved out of statutory bodies and into groups of a select few, bypassing established channels and fora. Other countries do not participate, directly or indirectly, but are called upon to contribute to efforts that others have agreed. The G20 discusses and aims to agree on changes in IMF governance. The vast majority of the membership of the IMF has no voice or representation in these discussions, including all lowincome countries and most emerging economies. If they are not addressed effectively, the large and growing global imbalances that contributed to the current crisis are likely to widen anew. This would again put at risk the stability of the global economy. Linked to these prospects are the continued rigidity of important exchange rates and excessive reserve accumulation leading to the build-up of unsustainable debt. I agree with those who have said that in recent years, the international monetary system failed to promote timely and orderly economic adjustment. 7 Global capital markets failed to channel surplus savings in emerging market economies into profitable longterm investment in wealthier countries. It would seem that we still risk repeating recent failures. Let me also mention another concern. Mercantilist attitudes may also gain ground in surplus countries.

Norway is recovering sooner than most countries, and Norges Bank was among the first central banks to raise its key policy rate. It did so twice in late 2009, up to 1.75%. As a global investor and an open market economy, my country shares the interests of most market participants, large and small. We have a common interest in a market-based international order, supporting a level playing field and sound economic governance. Like many other countries, we have benefitted greatly from economic and financial globalisation. It has delivered prosperity and growth without precedent. In the midst of the crisis, these gains must not be forgotten. The multilateralism of Bretton Woods At the end of the Second World War, 45 countries agreed to establish a new international financial and economic order with the Bretton Woods Institutions, the IMF and the World Bank, at its center. In his inaugural speech to the Bretton Woods Conference in 1944, US Treasury Secretary Henry Morgenthau noted the following: “We know that economic conflict must develop when nations endeavor separately to deal with economic ills which are international in scope. To deal with the problems of international exchange and of international investment is beyond the capacity of any one country, or of any two or three countries. These are multilateral problems, to be solved only by multilateral cooperation. They are fixed and permanent problems, not merely transitional considerations of the postwar reconstruction.