samchain/econo-pairs-v1 huggingface dataset:
James McAndrews: Modern recipes for financial crises Remarks by Mr James McAndrews, Executive Vice President and Director of Research of the Federal Reserve Bank of New York, at the University of Iowa, Iowa City, 4 December 2015. *  *  *  Original presentation is on the Federal Reserve Bank of New York’s website: Slides (PDF). The author wishes to thank Tobias Adrian and Thomas Eisenbach for helpful discussions and comments on the text of the speech. The views expressed are those of the author and do not necessarily represent the views of the Federal Reserve Bank of New York or of the Federal Reserve System. Introduction Franklin Delano Roosevelt, in his first fireside chat on March 12, 1933, cogently explained the mechanisms that led to the complete collapse of the banking system in the United States earlier that month: “First of all, let me state the simple fact that when you deposit money in a bank, the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit – in bonds, in commercial paper, in mortgages and in many other kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money that you put into the bank is kept in currency – an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen.

The main role of private equity is to fill the gap between internally generated financing and conventional market sources, such as bank loans and public equity. Unlike most stock market investments, equity investment enables shareholders to adopt a long-term and hands-on approach in their investee companies, fostering sound corporate governance and transparency, making appropriate contributions to business strategy and optimizing management. Crucially, however, it also contributes to the transfer of skills and has positive demonstration effects in terms of the development of local capital markets and competitive market-oriented behavior10. These modalities such 10  EBRD Transition report 2015-2016. 12  as, venture capital, crowdfunding, business angels, are relatively modest in the CESEE, although the same holds for the EU as well, where private equity has a share of around 0.3% in GDP. Debt market in the region is larger compared to the equity, averaging around 50% of GDP, which is still much lower compared to the EU-28 average of close to 160%. Yet, dominant part of this market segment is related to government securities, while the corporate issuance remains modest. In fact, in most CESEE countries, corporate bond markets remain small, or even nonexistent. Chart 14: Stock and debt market capitalization  Source: ECB and central bank websites. To recap, the region needs to mobilize finance, which amidst burdened government financing and structurally difficult access to bank finance for new and innovative companies, requires further development of the capital markets and more diversified portfolio of financial instruments.
For preferences not to be single-peaked members of the Committee would have to prefer, for example, both no change  BIS Review 34/2002  7  and a rise of 50 basis points to an increase of 25 basis points. It is not easy to see under what circumstances this would represent rational preferences. Third, the set, or as we call it suite, of models used by the Committee should be improved. They are in fact under continuous improvement and the Bank has commissioned Adrian Pagan to carry out a review of the technical aspects of modelling in the Bank. That review will be published in 2003. Fourth, it has been suggested that the MPC should meet outside London. The Court of the Bank does indeed meet once a year at a destination outside London, and these occasions have proved invaluable in expanding contacts between the Bank and the MPC on the one hand, and the local community, on the other. But MPC meetings themselves, as highly market-sensitive occasions surrounded by a purdah period, are quite unsuitable as opportunities to interact with the local business and other community. There would be little point in holding an MPC meeting outside London if the Committee were unable to speak and meet with local people. All members of the MPC travel widely around the UK outside of purdah, making some 50 visits during the past year, and these contacts are an important part of the process by which the MPC is informed about the state of the economy.

The second asked participants to play a simple monetary policy game, setting a short-term interest rate in order to minimise a loss function described by deviations of unemployment and inflation from desired target levels. The data generating outcomes for this hypothetical economy came from a two equation macroeconomic model of a fairly standard kind. Again a structural change - this time to the “natural” real rate of interest - would occur at some point during the game, and, by observing data generated by this economy, players would need to learn about the change in structure in order to set the appropriate interest rate. All the students who participated played both as individuals and in a group. In both experiments success could be measured on a quantitative scale, and both led to a common conclusion: that decisions made by committees were superior to those of individuals. How robust was this result? And what explained it? Last year, a team from the Bank of England attempted an exercise very much like Blinder and Morgan’s monetary policy experiments using a sample of just under 200 economics students from the 3 London School of Economics. Using a simple macroeconomic model that was broadly representative of the UK economy, the experiments examined how the performance of groups differed from that of individuals. And again they found striking evidence that committee decisions were superior.
Chart 19: UK government bond yields (10-year gilt yield) Per cent  18 16 14 12 10 8 6 4 2 0  1980  1985  1990  1995  2000  2005  2010  2015  2020  Sources: Bloomberg Finance L.P, TradeWeb and Bank calculations. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  Chart 20: UK real rates Per cent 26/06/2020  06/01/2020  0 -0.5  08/01/2018  -1 -1.5 -2 -2.5 -3 -3.5  0  2  4  6  8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 Maturity (Years)  Sources: Bloomberg Finance L.P., TradeWeb and Bank calculations. Notes: Chart shows UK instantaneous implied real forward curve. At its June meeting, the MPC weighed the upside news on demand against the downside news from employment when deciding to expand asset purchases by a further £ billion. My judgement on the balance of these risks led me to vote to maintain the monetary stance rather than loosen it further. I judged the upside news in demand since our previous meeting in May to have outweighed the negative news to the UK’s economic outlook. Let me illustrate my thinking with a simple thought-experiment. In the May MPR scenario, inflation and output fell sharply in the first year before recovering, with the output gap closed by year 2 and inflation back to target by year 3.

Patterson, K and Pyle, G (1991), ‘The Geography and Mortality of the 1918 Influenza Pandemic’, Bulletin of the History of Medicine, Vol. 65, No. 1, pp. 4-21. Samuelson, P (1948), Economics, McGraw-Hill Spreeuwenberg, P, Kroneman, M and Paget, J (2018), ‘Reassessing the Global Mortality Burden of the 1918 Influenza Pandemic’, American Journal of Epidemiology, Vol. 187. No. 12, pp. 2561-2567. 24  All speeches are available online at www.bankofengland.co.uk/speeches  24
A clear-cut arrangement for the management of crises can be difficult to construct in advance. It is hard to tell at present how these problems should be resolved. In principle there are two conceivable approaches. One involves continued cooperation on agreements, joint principles and regulatory frameworks. The other is to have more supranational management. It is probably a combination of the two that will be needed. The important thing today, however, is that a debate on these complex issues gets under way before we find ourselves in a situation where it is necessary instead to deal with them in an emergency. More advanced risk management Another factor that will probably affect future work on the supervision and oversight of stability is the banks’ increased possibilities of managing risks. The assessment of risks is one of banking’s traditional functions. Things have changed markedly in this respect since the mid 1990s. Technical progress and new financial theories have led to a refinement of the methods for and possibilities of measuring credit risks. This has been accompanied by facilities for trading risks with additional financial instruments in increasingly international markets. All this has enhanced the ability of the banks to manage risks. Banks in general - not just the largest international groups - have invested in new systems for risk management. The trend, which began earlier, has been accelerated by the new capital adequacy rules, Basel II, that have just been produced.

In line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. We have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. I avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well-capitalised. Safeguarding the stability of this system will always be on our focus. BIS central bankers’ speeches  1  Third, reducing uncertainties and risk premiums in the economy is an important priority. As I have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the Albanian economy. Without intending to make a list, I will mention just a few: •  Reducing informality should be a primary objective. Besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. •  Fostering the financial system infrastructure protection is another aspect deserving attention. The Bank of Albania signed and has already made effective a cooperation agreement with the People’s Bank of China, which also provides for the possibility to obtain liquidity in case of need. An important step in this regard is the agreement between the Deposit Insurance Agency and the European Bank for Reconstruction and Development to increase the deposit insurance coverage.
This can push up risk premia and credit spreads, and push down stock prices—which can more than offset the impact of an easier monetary policy. Divergences between short-term interest rates and financial conditions often appear to be larger and more persistent in the United States than in most other advanced economies. There are several reasons for this. First, the U.S. financial system depends less on its banking system to 2/6  BIS central bankers' speeches  intermediate financial flows than in other countries. The share of credit supplied by the banking sector fluctuates around 50 percent in the United States, which is much lower than in the euro area, Japan and the United Kingdom (Exhibit 2). Second, in contrast to most other countries, U.S. residential housing is financed mainly by 30-year fixed-rate mortgages, rather than—as is the case in most other countries—adjustable-rate mortgages with rates that much more closely track their central banks’ short-term interest rate targets. Third, the equity market plays a much more important role in the United States than elsewhere. The total market capitalization of the U.S. equity market is considerably higher than in the euro area and Japan (Exhibit 3). Because the evolution of financial conditions can diverge from the path of the federal funds rate, financial conditions need to be carefully considered in the conduct of monetary policy. However, I want to reiterate that what we care about is not financial conditions themselves, but rather their influence on economic activity.

As Federal Reserve Chair Yellen explained in a recent speech, not only are there a plethora of rules to choose from, but following any monetary policy rule in a perfunctory manner would likely lead to inappropriate monetary policy at times—especially during economic turning points when the outlook is changing rapidly.6 Also, requiring the Federal Reserve Chair to explain frequently why the FOMC had deviated from a particular rule would unduly impinge on the ability of the FOMC to conduct monetary policy in a manner insulated from short-term political considerations. Of course, Congress has the right to hear from the Federal Reserve about its conduct of U.S. monetary policy. There are already several opportunities, including regular testimony and semiannual monetary policy reports. If Congress desires, such communications could become more frequent or enhanced. But, my point is that these exchanges should not be triggered by deviations from a mechanical rule. And, of course, I feel that this is especially true for a rule that does not account for financial conditions. Now that I have expounded upon the importance of financial conditions, I would like to discuss their implications for the current stance of U.S. monetary policy. As I see it, there were a number of factors behind the FOMC’s decision in March to take another step in gradually removing accommodation by raising the federal funds rate target by 25 basis points to a range of three quarters of a percent to 1 percent. Most importantly, the economy has continued to grow modestly above its sustainable long-term pace.
It is true that, to the extent that the present imbalance within the economy reflects sterling’s appreciation against the euro, we would have been protected against that. But, with accelerating inflation in the economy as a whole, the price of such protection of the suffering sectors would have been tantamount to real exchange rate appreciation, which would in any event have damaged their competitive position. And, it would not in that case be possible to reverse that effect through exchange rate adjustment. Joining EMU from the start would in fact, as things have turned out, have been a strong form of relaxing our objective for consistently low inflation in the economy as a whole to ease the pressures on the internationally-exposed sectors which I argued against a few moments ago. There are no easy answers so long as our economies continue to diverge. Coping with such tensions as may emerge within the Eurozone - with or without the UK - is likely to be easier in a context of structural, supply-side flexibility and adaptability - which also, as I say, essentially determines the underlying rate at which the economy can expand in the medium and longer-term. The Eurozone started with chronically high unemployment. Some countries still have very high ratios of public debt to GDP. And most face the prospect of an increasing burden on their public finances with ageing populations.

This current plan helps promote competition in the financial market. Continuity of these plans and implementation over several years has improved Thailand’s financial infrastructure, as indicated by lower cost-to-income of commercial banks. Progress is especially visible in the SME segment. Promoting competition among players in the banking sector has steered banks to seek more opportunity in this segment. At the same time, the Bank of Thailand has helped lay down infrastructure that reduces the asymmetric information problem in this segment by means such as setting up the SME Database. With the convincing results of the current plan which will end this year, the Bank of Thailand has recently set up a steering committee to look after the next phase, Financial Sector Master Plan Phase 3. In addition to Financial Sector Master Plan, the Bank of Thailand also encourages Thai companies and depositors to diversify their investments and promote financial market development through the implementation of Capital Account Liberalization Master Plan. As a result, there is increase in the number of Thai companies doing outward Foreign Direct Investment which allows capital as well as resources to be allocated more efficiently. 4  BIS central bankers’ speeches  At this point, it is important to note that resources and infrastructure built by the government and central bank are not sufficient in themselves to lift the economy’s growth potential. More importantly, financial institutions and businesses must utilize them and act as the main player that will drive the economy to its highest potential.
Simon M Potter: Models only get you so far Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, for the Federal Reserve Banks of Atlanta and New York's First Annual Joint Research Day on Quantitative Tools for Monitoring Macroeconomic and Financial Conditions, Federal Reserve Bank of New York, New York City, 22 February 2019. * * * Accompanying Figures of the speech. As prepared for delivery It is a pleasure to deliver the lunchtime address during the Atlanta and New York Fed's first annual research day on quantitative tools for monitoring macroeconomic and financial conditions.1 My remarks will focus on some insights from the book Superforecasting by Philip Tetlock and Dan Gardner, with respect to how we interpret, use, and evaluate the results from our quantitative tools.2 If you have read the book, subtitled "The Art and Science of Prediction," you will probably be aware that it is much less mathematical than the discussions we have been having today, but at the same time is more complex in how it articulates the role of forecasting in good decision-making. Before I continue, I should note that these remarks reflect my own personal views and not necessarily those of the New York Fed or the Federal Reserve System. The insights in Superforecasting grew out of a forecasting tournament sponsored by the Intelligence Advanced Research Projects Activity (IARPA).

12 An early, working paper version of this research can be found in Marcelle Chauvet and Simon Potter,  Forecasting Recessions Using the Yield Curve, Federal Reserve Bank of New York Staff Reports, number 134, August 2001. 13 Brier scores measure probabilistic forecasting accuracy as a function of the distance between a probability  estimate and the actual outcome. For details on origin and calculation see “Verification of Forecasts Expressed in Terms of Probability,” Monthly Weather Review 78, no. 1, 1950. 14 See Michael D. Bauer and Thomas M. Mertens, Economic Forecasts with the Yield Curve, Federal Reserve Bank  of San Francisco Economic Letter, 2018–07, March 5, 2018. 15 Tetlock does discuss ambiguity aversion. Formalizing its role and that of asymmetric loss functions, seen for  instance in the work of Hansen and Sargent, is a good example where formal modeling can make significant advances over less structured judgmental approaches when it comes to decision-making based on forecasts. 16 The minutes to the July 31-August 1, 2018, FOMC meeting report on a Committee discussion about monetary  policy options at the zero lower bound. Although participants generally agreed that their current policy toolkit could provide significant accommodation, participants saw an apparent secular decline in neutral real interest rates as leaving less scope than in the past to reduce the federal funds rate in response to negative shocks, meaning spells at the ZLB could become more frequent and protracted than in the past.
For example, suppose a CBDC or the digital euro is easily and widely accessible across borders or in countries facing financial instability. In such cases the citizens could substitute local currencies with the digital euro and make the domestic financial situation even worse. This is the scenario we must avoid. UNCERTAINTY Finally, we must all ask ourselves in what kind of financial reality we want to end up in because it could be a world of indirect currency competition pursued by private companies only as a matter of industrial and technological race. But, at the same time, we could end up in a world where payments are safe, easy to use and settled instantly - both domestic and international and with negligible costs. But will we end up in a world where our privacy is protected and our trust in the system is preserved in times of crisis? Are we going to put our trust solely in computers, protocols, artificially generated outcomes or centralized private companies' algorithms with a global reach? Or do we want public institutions to do their job, protect our interests when no one else will, and be there when we need them? CENTRAL BANKS - LEADERS OF CHANGE Our mandate is to continue to provide trust in money in the digital age. To be a vital part of this new digital world, a new reality. We must not stay aside and observe while the "The Times They Are A'Changin'" and external factors move our whole world in a strange direction.

Are we going to see the decline in the dominance of one global currency and its replacement by a new one or the formation of an alliance between currencies? Will it be the dominance of technology companies in providing payment services to the general public? TRUST Whatever the case may be, there is one thing we are certain of: Nothing has changed in our central banking task of maintaining the trust of the public in money and the financial system. Or to quote my colleague banker from the Bank for International Settlements, Mr Augustin Carstens, "The soul of money is trust.". We are still here to pursue monetary policy goals, to preserve the value of money by providing trust in the value of money and to offer money as a payment instrument that is widely accepted, secure, cheap and convenient. Our institutional task is to maintain confidence in the financial system and to serve as an anchor – a digital exchange for all other sorts of money that private issuers offer. To mention at this point – please, don't forget, everything you have today in your digital wallet, mobile banking app or similar is some sort of a payment instrument issued by a private entity. Some of them we supervise, some of them we don't. Whether it's a bank, a payment service provider, a stablecoin issuer or a globally interconnected anonymous network of nodes like Bitcoin, it isn't us you are banking with. But ... this may change.