samchain/econo-pairs-v1 huggingface dataset:
(2007), Convergence and Anchoring of Yield Curves in the Euro Area, ECB Working Paper No 817. 14  See Christiano, Motto and Rostagno (op. cit.). 15  See Bini Smaghi, L., Il paradosso dell’euro (2008), Rizzoli. 6  BIS Review 135/2008  whole to be less proactive and more regulation-based than in the United States, where discretionary powers are broader. I would like to begin by briefly analysing government budget’s two component parts, namely automatic stabilisers and discretional measures, in order to allow me to better examine the differences between European and US policies using the same model for interpretation as I used with monetary policy. 3.1  Automatic stabilisers and discretionary budget policies  The automatic stabilisers are the component of government expenditure and revenue that automatically varies with the economic cycle, without requiring any explicit decision on the part of governments. These mechanisms are the result of the social protection and welfare system, of the institutions underlying the labour market and of various components in the taxation and public expenditure system. They depend largely on political decisions and operate in an automatic and anti-cyclical fashion, in the sense that they reduce revenue and increase expenditure when the cycle slows down, and vice versa. As far as discretionary measures resulting from specific fiscal policy decisions are concerned, their usefulness as a an anti-cyclical tool has been a matter for debate for a long time now, both in the euro area and in the United States.

Lorenzo Bini Smaghi: Economic policies on the two sides of the Atlantic – (why) are they different? Lecture by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the Collegio Carlo Alberto, Moncalieri, 7 November 2008. * 1. *  *  Introduction 1  The United States and the euro area are the two main economic and monetary areas in the world and they are reasonably similar in size, with a population of over 300 million (300 million in the United States and 320 million in the euro area) and GDP of around € billion at current prices (at the going rate of exchange of around USD 1.30 to the euro – US GDP is worth around € billion, while euro area GDP is worth around € billion). The economic policies implemented in these two areas act as a reference for the whole world’s economy. They are carefully scrutinised and compared by academics, market players and commentators. In recent years, the two economies have been compared in a largely asymmetrical way, possibly a hangover from an obsolete institutional setup and analytical reference framework. While in the United States economic policies are mainly assessed on the basis of the US economy’s underlying state, in the euro area the assessment is made on the basis not only of European economic fundamentals, but also, and indeed above all, with reference to economic policy decisions made on the other side of the Atlantic.
That transparency was given a further boost by the creation of the Monetary Policy Committee where the votes of all members are published along with the minutes of the discussion at MPC meetings. Despite its record on transparency, questions have been raised about whether the MPC could go further. Do the published minutes reveal enough about individual views? Should there not be individual paragraphs in the minutes explaining the position of each member? Why does the Committee not publish a forecast corresponding to the path of interest rates that it feels most likely to be necessary to meet the inflation target? Why does the central projection of the forecast always seem to end up at close to the target of 2.5%? It is helpful to step back and ask three more fundamental questions. First, what is the MPC trying to communicate? Second, how should it communicate? Third, what is the role of the inflation forecast? The basic message which the MPC is trying to communicate is that, over the medium term, inflation should be expected to average 2.5%, and that the Committee will respond to events as they unfold in order to keep inflation on track to meet that target. Hence the Committee needs to explain its view of the current state of the economy, how and why it has reacted to events that have already unfolded, and what it believes are the risks lying ahead. All of this can be encapsulated in its “policy reaction function”.

Hence the Committee has come to the view that, by and large, it is better to wait until the publication of the minutes when a fuller view of issues and views can be provided. That is not to say that press statements will not appear in future, but to stress that their purpose is limited to explaining a decision that might be unexpected, irrespective of whether that is a change or no change in rates. On the whole, the minutes have been successful in creating a wider understanding of the issues discussed by the MPC, and have a devoted, if small, following. The Inflation Report, which pre-dates the MPC, has a broader objective in setting out a comprehensive view of the current state of the economy, and describing the outlook for inflation in terms of a forecast over a two-year horizon. The Committee puts great weight on explaining the forecast in terms of probabilities. Hence it has adopted the famous coloured fan charts for its forecasts for both growth and inflation. But there remains some confusion about the role of the forecast. With the advent of the MPC, the tensions between explaining nine individual views and presenting a coherent account of the Committee’s view of the economy have complicated the production of the forecast. The Inflation Report now contains an explicit description of differences of view among the Committee in respect of both the central projection and the risks to the forecast, as well as the “best collective judgment”, or majority view, of the outlook.
The bottom line is that the entire system was suffering from a self-reinforcing cycle of liquidity runs and concerns about the solvency of financial institutions. An effective policy response had to address both aspects of this cycle. Responding to the demand for dollar liquidity It took government actions on many fronts to stabilize the financial system. Many of these efforts were aimed at addressing the solvency problems facing the financial sector, including the injection of capital into financial institutions and two of the housing GSEs. These efforts were critically important to the recovery of financial markets. However, l will focus my remarks on another important part of the government response – the actions taken by central banks and other government entities to address the liquidity strains in the markets. Central banks around the world responded vigorously to the erosion of liquidity conditions. The lender-of-last-resort function of central banks proved to be critical for supporting market functioning and stemming contagion. For the Federal Reserve, this function had to evolve in response to the nature and location of the liquidity disruptions it sought to address. The Fed’s traditional lender-of-last-resort tools are designed to ensure adequate liquidity for depository institutions. But the liquidity strains went beyond the banking sector and into the market-based credit system. The traditional tools were not adequate to address the problems faced in this more complicated intermediation system, and hence the Fed had to innovate – under extreme market conditions and with little time to spare.

While some of the innovations were still aimed at depository institutions, most of the facilities introduced were intended to address liquidity pressures at sets of firms in various financial markets, including primary dealers, money market mutual funds, commercial paper issuers and holders of asset-backed securities. In the end, these facilities effectively backstopped many of the different components of the shadow banking system. The efforts to ensure that the system had adequate liquidity also involved other government programs, such as the Federal Deposit Insurance Corporation’s (FDIC) debt guarantee and  4  BIS Review 40/2010  the U.S. Treasury Department’s money market guarantee. Those programs in effect broadened the insurance provided by the FDIC on bank deposits to other liabilities in the banking and shadow-banking systems. The combination of the liquidity and guarantee programs was instrumental in stabilizing the financial system. It is also worth noting that the demand for dollar funding proved to be global in nature, as financial institutions around the world faced an elevated need for dollar funding in response to market stress. This need was met by the liquidity swap lines that the Federal Reserve set up with fourteen central banks around the world. These swap lines provided dollar funding to foreign central banks so that they could inject dollar funding into their own markets, in order to address the funding demands of institutions operating during their market hours.
The challenge, now, is to calibrate and phase in the new framework in a way that does not impede the recovery. The macroeconomic assessment of the reforms underway will help us strike the optimal balance. 25. Beyond capital and liquidity, other important initiatives are aiming at addressing systemically important financial institutions and cross-border resolutions. To better deal with the problem associated with systemic firms, progress is being made to improve the capacity to resolve them orderly, and to strengthen ex ante preparedness, contingency planning, cooperation and information exchange among the relevant authorities. 4  BIS Review 113/2010  26. There is a broad agreement for an approach that may have two pillars. One is about tools and measures to limit the risk of their failure; the other is about tools and measures to limit the consequences of their failures. Discretion is required to allow national authorities to strike the balance between the two pillars and tailor regulatory and supervisory actions to domestic conditions. The challenge is to ensure that national policies to address the risks associated with these firms are consistent, mutually supportive and thus avoiding regulatory arbitrage. But beyond international initiatives, enhancing supervision at the domestic level remains very critical. 27. Higher and better capital and liquidity standards are not sufficient conditions to secure the stability of the financial sector. Changes in the practice of micro-prudential oversight are also needed. Indeed, a lesson from the crisis is that the way supervision was performed prior to the crisis has likely contributed to it.

The monetary base has thus increased by around 300 per cent. In simpler economic models one usually assume that there is a fixed relationship between the monetary base and the money supply. 2 The question that has been discussed is whether the large increase in the monetary base could give rise to rapid inflation. But for this to happen the money volume in society must also increase, that is, as well as the monetary base increasing, the general public’s deposits in the banks must increase. This could happen if the increase in the monetary base leads to the banks increasing their credit granting to the general public and if this in turn leads to the general public depositing more money with the banks. In the prevailing economic downturn this has not been the case. The banks have tightened their credit granting, while demand for credit has declined, particularly from companies. A more reasonable interpretation of what has happened is that the banks have increased their demand for liquid reserves in the Riksbank. Put simply, one can say that the bank system as a whole has borrowed as much from the Riksbank as it is willing to invest as a deposit with the Riksbank. Thus, the ratio between the monetary base demanded and the money supply has increased, or in other words what is known as the credit multiplier has  2  Money supply here refers to the general public’s holdings of banknotes and coins and the general public’s deposits with the banks.
This confirms their capacity to meet the targets set for 30 June 2012 by the European Banking Authority (EBA), thereby contributing to their adaptation to the future Basel III regulatory framework and the fulfilment of the objectives announced to the market. Lastly, the ACP has resolutely placed its individual supervision within a macro-prudential perspective. Our Authority has been particularly attentive to the way banks fulfil their role in financing the economy via the extension of loans to non-financial companies and to households, in a context in which both regulatory changes and liquidity constraints, particularly in dollars, have prompted certain groups to deleverage. It has undertaken an in-depth analysis and published studies on developments in household credit as well as the reallocation of households’ financial investments, particularly between bank savings products and insurance savings products. II)  2011 – and this is my second point – was a year that saw the reinforcement of the methods used in prudential supervision. It was above all the year in which the process of merging banking and insurance supervision was completed. Having been set up in the midst of the crisis that we are going through, the ACP continually reviews the methods it uses to deal with new challenges. On the one hand, the traditional activities of on- and off-site inspections have been enhanced by taking the best procedures and practices from each of the two sectors, leading to improved quality and comparability in the assessment of the situation of the different institutions being inspected.

There was also some improvement in the female participation rate, from 35% to 38%. New challenges lie ahead A sense of satisfaction is, therefore, justified. Complacency, however, is not, for much remains to be done. And any further progress will have to be pursued in an external environment that has become even more challenging. In the first place, competition, mainly from Asia, has eliminated any residual advantage in our labour intensive industries, and represents a growing threat even in more capital and knowledge intensive activities. Another worrying development is the increasing prospect of a slowdown in global economic activity, reflected in the recent downward revisions to GDP growth forecasts by leading central banks and multilateral institutions. The full impact of the chain of events set off by the sub-prime mortgage crisis in the United States has yet to be felt, and risks being compounded by the mounting inflationary pressures in commodity markets, especially for oil and agricultural products, with as yet unpredictable consequences. Given the circumstances, while the adoption of the euro will undoubtedly enable Malta to face these challenges from a stronger position than if the convergence process had been slower, the euro alone will not be enough. Against this background, I would be failing in my duty if I did not express concern at the insufficient recognition by public opinion of the risks that the evolving external scenario poses for the Maltese economy and of the need to improve the country’s international competitiveness.
For evidence, we only need to look to the spread of infectious disease such as Covid-19 and severe floods that are occurring at shorter intervals and with greater intensity. But transition risks are also intensifying. With the announcement of the net zero national target, further changes in climate policies are inevitable to achieve the target. Technological changes will also have important economic and financial consequences for businesses and those that fund them. So will changing consumer preferences. And if that isn’t sufficiently persuasive, the reality of disorderly transitions, once thought to be a risk further into the future, has now been brought painfully home for many with the energy crisis that is confronting Europe. The financial sector has a critical role in helping the economy and society mitigate these risks. At Bank Negara Malaysia, we see this from two perspectives. First, as part of our mandate to manage risks to financial stability, we expect financial institutions to understand how climate-related risk drivers can impact their risk exposures - including credit, market and insurance risks from their lending, underwriting and investment activities. We expect financial institutions to be able to identify, measure and manage these risks well. Second, we believe that the financial sector can and should play a catalytic role in the transition towards a low carbon economy through its control of resources that fuel the economy. With this in view, let me highlight a few key developments that will shape the Malaysian financial sector’s climate response in the coming years.

Deputy Governor's Opening Remarks at the Cagamas Developing and Financing Green Housing in Asia (DFGH 2022) Conference Speaker: Puan Jessica Chew Cheng Lian / Venue: Kuala Lumpur / Language: English / Speech/Interview Date: 21 Sep 2022 /  It would be hard to overstate the importance of any meaningful effort that might bring us closer to the goal of mitigating the impact of climate change. In a region with among the highest home ownership, where up to nine in every ten families will buy the home that they live in, a conference on green housing must surely be on that list. So it is my great pleasure and privilege to be here today to share some thoughts with you on what the financial sector is doing, and can still do more, to manage climate related risks and support the climate transition. The importance attached to owning a home is a long-standing cultural norm in our society. While that has not changed, there is a growing awareness of the impact that the places we live and work in day by day can have on sustainability. The environmental impact of buildings in terms of greenhouse gas emissions stems not only from energy use for lighting and air conditioning, but from the way in which buildings are constructed, operated and managed. Globally, the building sector accounts for more than 40% of energy consumption, generates approximately 40% of all waste, and consumes 16% of water for construction.
As I have said from the start, public debt may not be able to play that role to the same extent as before. The ultimate safe asset, therefore, will be the currency itself. Markets and lenders will trust those currencies that, whatever the circumstances, are managed with one overriding priority: preserving price stability and the intrinsic value of the currency unit. On this fundamental basis, we can look at the future of the euro with strong and realistic optimism. I see the  BIS central bankers’ speeches  3  recent decision by the Swiss central bank to peg the CHF to the euro as a confirmation of this statement. A few words on the banking sector, and, of course, French banks. I would remark, first, that banks have been hit in all advanced economies by the downward revision of growth prospects. Since August, CDS premia on major banks and BOR-OIS spreads have risen in all regions, although to a larger extent in Europe, displaying everywhere a sharp rise of counterparty risk. By the same token, banks’ share prices fell in all major economies, with French banks being particularly hit. This overreaction of share prices can be explained by a simple amplification mechanism: slower growth means lower profits, thus lower projected dividends. At the same time, banks are required to build additional capital buffers, which further constrain their pay-out ratio. So dividend prospects are doubly affected and that explains why, in the current period, share prices are reacting so strongly to negative news on growth.

Now that this certainty is gone, debt sustainability may well rest on a more fragile and volatile basis. As we all know, debt sustainability depends on three variables: the primary surplus, the growth rate and the interest rate. The relationship between those three parameters and debt can be expressed through a simple equation, the famous “unpleasant arithmetic”. Assessing sustainability seems therefore relatively straightforward. Many economists and market analysts on sovereign European debt simply assume low growth and high interest rates forever in peripheral countries – which enables them to conclude categorically that debt is not sustainable. A (slightly) more sophisticated and developed version of that story takes account of the impossibility, for Euro economies, to depreciate their exchange rates, therefore locking them into a low competitiveness and no growth equilibrium. I see three major problems with those analyses. First, the competitiveness story does not hold. Take the UK, for instance. Its effective real exchange rate has depreciated by 23% over the last four years. And its exports have grown by a healthy 15%, in nominal terms, over the first six months of 2011. But Italy, Spain and Greece have done even better, with exports growing respectively by 16%, 19% and 37% during that same period, and, of course, no exchange rate adjustment. Equating competitiveness with exchange rate depreciation is therefore overly simplistic. This does not mean that efforts to improve competitiveness in many parts of the euro area should not be strengthened.
Figure 14 World growth (*) (annual change, percentage) 8 6 4 2 0  60  64  68  72  76  World Emerging economies  80  84  88  92  96  00  04  08  Developing economies Emerging exc. China  (*) 1961-1979 data from World Bank. Later data from IMF. Weighted by PPP. Sources: World Development Indicators (2008) and WEO April 2008. BIS Review 124/2008  15  Figure 15 Stock markets (index, jan.08 = 100) 120 110 100 90 80 IPSA Nikkei Bovespa  70 60 Jan.08  Dow Jones Hang Seng (Hong Kong) FTSE 100 (UK)  Mar.08  May.08  Jul.08  Sep.08  Source: Bloomberg. Figure 16 EMBI (basis points) 360  Chile México Mexico Brasil Brazil  1,100  Venezuela Ecuador  305  950  250  800  195  650  140  500  Jan.08  Mar.08  May.08  Jul.08  Sep.08  Source: Bloomberg. 16  BIS Review 124/2008  Figure 17 Exchange rates in emerging economies (local currency per dollar, index jan.08 = 100) 120  Brazil India Israel  Mexico Russia Chile  China Turkey  110  100  90  80 Jan.08  Mar.08  May.08  Jul.08  Sep.08  Source: Bloomberg. Table 1 World growth (*) (annual growth, percentage) Prom. Prom. 1990-99 2000-05 World  2,9  3,8  2006 2007 (e) 5,1  5,0  2008 (f) May. Sep.  2009 (f) May.

Jean-Claude Trichet: Interview in Handelsblatt Interview with Mr Jean-Claude Trichet, President of the European Central Bank, in Handelsblatt, Germany, conducted by Ms Marietta Kurm-Engels and Mr Andreas Hoffbauer on 12 May and published on 14 May 2010. *  *  *  Handelsblatt (HB): Mr Trichet, you intend to withdraw all of the liquidity that you are currently injecting into the markets via the purchase of government bonds. Do we have to face inflation in the euro area? Trichet: No, not at all. Price stability is our primary mandate and over the past 11½ years we fulfilled our mandate successfully. We have not changed our monetary policy stance. The additional liquidity that we are providing through the purchase of government bonds will be withdrawn again. Interest-bearing time deposits are an appropriate way to withdraw this liquidity. HB: What induced you to take this extraordinary step on Monday morning? You had made no mention whatsoever thereof at the press conference just three days earlier. Trichet: On Thursday afternoon and Friday, we were facing a situation that we regarded as fundamentally abnormal. That situation deteriorated abruptly, sharply and extensively. The very moment where the agreement was reached in Europe to provide Greece with financial support and the imminent decision of the International Monetary Fund (IMF) to approve the Greek standby should have contributed on the contrary to ease tensions in the markets … HB: … which was not the case? Trichet: No, the contrary happened.