samchain/econo-pairs-v1 huggingface dataset:
That reflects both lower inflation expectations and smaller risk premia to compensate for future inflation uncertainty. The total inflation premium - the sum of expected inflation and the inflation risk premium - is measured by the difference between yields on conventional and index-linked government securities. Chart 2 shows that the total inflation premium fell significantly on the announcement of Bank of England independence and the creation of the MPC. It is highly suggestive of a fall not just in expected inflation but also in the inflation risk premium. In principle, the behaviour of businesses and households depends on real interest rates - nominal interest rates less 2 the expected increase in prices. To the extent that the inflation risk premium falls, then so too does the level of real interest rates. The evidence in Chart 2 suggests that real rates have fallen too, although by less than nominal rates. Chart 1 Annual inflation in the UK  Note: Four-quarter growth rate of the quarterly retail price index (RPI) until 1974, and four-quarter growth rate of the quarterly retail price index excluding mortgage interest payments (RPIX) after 1974. Note that the RPI methodology before 1974 did not include mortgage interest payments, so the RPI series before 1974 is equivalent to RPIX in that sense. Data up to 2002 Q3. Source: ONS. 1  The conclusion reflects statistical tests including first-order auto correlations of consumer price inflation over ten-year rolling windows, and estimated spectral densities for inflation from a random coefficient AR (4) and GARCH (1,1) model.

Excess domestic demand combined with low productivity growth should be reflected in rising prices, and domestic measures of price and wage inflation in the catchingup economies were indeed running considerably higher than the euro area average on a cumulative basis. Average annual inflation differentials in the 2002 to 2008 period were in the range of 0.5 to 1.5 percentage points. However, these developments were not considered especially alarming by some observers as they were interpreted as reinforcing the theory of Balassa-Samuelson equalisation. Some also saw inflation differentials as being more reflective of low inflation in Germany as it went through a phase of wage adjustment. Overall, this may have led to less concern about the lack of real convergence in productivity levels than was warranted. 8  European Commission, “EMU@10: Successes and challenges after ten years of Economic and Monetary Union”, European Economy 2, 2008. 9  See for example Minsky, H (1982), “Can ‘it’ happen again?”, Essays on Instability and Finance. 10  Drehmann et al (2012), “Characterising the financial cycle: don’t lose sight of the medium term!”, BIS Working Papers No 380, June 2012. 11  For a detailed explanation see Borio et al (2013), “Rethinking potential output: Embedding information about the financial cycle”, BIS Working Papers No 404, February 2013. 4  BIS central bankers’ speeches  Achieving sustainable convergence It was only when the financial cycle turned that the unsustainability of economic convergence became apparent.
Mr Carse gives a speech on the subject of credit risk during the Asian crisis Speech by Mr David Carse, a Deputy Chief Executive of the Hong Kong Monetary Authority, at the Asian International Conference & Trade Credit Workshop in Hong Kong on 5 May 1999. Ladies and gentlemen, I am very pleased to have the opportunity to speak to you today on the subject of credit risk during the Asian crisis. Given the fact that just about every economy in the region has been affected by the crisis to a greater or lesser extent, this is rather a large topic; and I hope that you will forgive me therefore if I begin with some generalities about the region as a whole, but then make some specific observations based on my own direct experience of credit risk as it has affected banks in Hong Kong. Hong Kong is a melting pot of international and regional banks and you can be sure that any credit problems that surfaced in Hong Kong during the crisis manifested themselves elsewhere in the region, and probably in a much more virulent form. It is a sobering fact that we are only two months away from the second anniversary of the Asian crisis, and we are still analyzing what went wrong. Explaining the origins of the crisis has helped to maintain many academics, particularly in the United States, in gainful employment.

To be successful in this objective requires a number of factors to be in place at both the individual bank and sector levels. In individual banks, there must be an effective system of credit monitoring and loan classification to detect problem loans at an early stage and to enable corrective action to be taken as soon as possible. As I have already indicated, the shift from relationship banking and the unwillingness of borrowers to supply sufficient information have been hindering factors in Hong Kong in enabling banks to pick up early warning signals. Once problems have been detected, it may be sufficient in the early stages to leave the handling of these with the account officers. But when the problems are too deeprooted, there will usually be advantage in transferring problem loans to a dedicated loan recovery unit where specialist expertise attention can be devoted either to restructure the loans or to take recovery action and liquidate any collateral. This is the theory, but it is easier said that done to find loan recovery specialists when many bankers in the region have not experienced a prolonged period of economic decline. Outside experts, for example from the accounting firms, can help to fill some of the gap. But it is also essential that the banks build up their own resources and provide more training to their own staff on how to deal with problem loans.
That is why strategic investors with new knowledge are so important for overall growth. Let me be a little provocative and state that unfortunately multilateral institutions rarely talk about human capital explicitly. For example, the EBRD Charter (quoted after Bronstone, 1999) does not mention developing human capital as EBRD’s role. A bureaucratic answer might be that that is not its mandate. But, according to the EBRD’s Transition Report: “The EBRD seeks to foster the transition to an open market-oriented economy and to promote private and entrepreneurial initiative in all 26 of its countries of operation”. (EBRD, 1999, p. vi.) If we agree that human capital is so important in transition, I ask myself how we can achieve this ambitious goal without knowing more about the level and development of human capital in its countries of operation? Does the EBRD have a set of measures of human capital in transition countries (both cross-country and time series), maybe invent a new index on human capital (like the broadly quoted one for privatization), a separate chapter in the Transition report? Please, let me assure all EBRD governors, management and staff that these remarks are made only in good faith in the hope that we will all reflect upon them a little bit. In a more general framework let us ask ourselves the following question: Have we done enough in the past to achieve this goal? I doubt whether a lot of people in this room (and policymakers in transition economies in general) will say yes without hesitation.

There is not a single doubt in my mind that for transition to be successful countries need to open up, promote foreign direct investment as much as possible, extensively use foreign technical assistance, embrace transfers of knowledge, participate and benefit from globalization, and, last but not least, exploit to the maximum the beneficial role of international financial organizations in general and the EBRD in particular as this institution was created for us. All those elements are necessary. But, it is my strong belief that the ultimate test of a successful transition lies within us. Why? Simply because, it’s the people’s transition, isn’t it? Thank you very much for your attention. BIS Review 43/2000  8  Literature: Bronstone, A (1999): The European Bank for Reconstruction and Development. Manchester University Press, Manchester. Collier, P (1998): Social capital and poverty, The World Bank, Social Capital Initiative, WP No. 4 EBRD (1999): Transition Report, London. Fischer, S and R Sahay (2000): The Transition Economies After Ten Years of Transition. IMF Working Paper, February. Flanagan, R J (1998): Were communists good human capitalists? The case of the Czech Republic, Labour Economics, Vol. 5, No. 3, pp. 295-312. Frydl, E J (1999): The Length and Cost of Banking Crises: IMF Working Paper (WP/99/30). Fukuyama, F (2000): Social Capital and Civil Society. IMF Working Paper 00/74. Hillman, A L (1999): In Transit to the Promised Land: Ten Years in the Wilderness Without Moses. Fifth Dubrovnik Conference on Transition Economies, June 1999.
Intermediation among non-residents The third set of characteristics involves the provision of intermediation among non-residents. The Eurodollar market provides efficient intermediation among non-residents. For example, it allows for Eurodollar bonds to be issued by non-US entities and bought by non-US investors. To an increasing extent, the offshore RMB market is functioning as a platform for RMB financial activities conducted by non-residents. The pool of RMB deposits in Hong Kong, being deposits of mainly non-Mainland individuals and corporates, is exceeding RMB 800 billion. Adding to that is the dim sum bond market, which has a size of RMB 260 billion at present. Offshore RMB bonds are being issued by Mainland Chinese entities as well as multinationals, and they are being bought by offshore investors. At the same time, banks in Hong Kong are extending RMB loans to customers, with the outstanding amount of such RMB loans currently stands at close to RMB90 billion. 2  BIS central bankers’ speeches  As the market deepens and a greater variety of RMB products become available offshore, we will eventually see more RMB intermediation within the offshore markets, especially as non-Chinese residents become willing borrowers of RMB. However, for that to happen, work on different fronts needs to be pursued and market efficiency furthered through innovative solutions and active participation by different market players.

But even though the zero lower bound is not absolute, the effect of further cuts will diminish as rates approach or fall below zero. The most important limitation on how far down it makes sense to go is related to the existence of an alternative to bank deposits, i.e. cash. Negative bank deposit rates can always be avoided by holding cash instead. The disadvantage is that cash is more expensive to manage than electronic deposit money. Transport, storage and security all involve costs. For a bank participating in the settlement system, where large amounts are reinvested at frequent intervals across accounts and across banks, the costs involved in switching to cash will be considerable. Central bank deposit rates can therefore be below zero. How far below, is an open question. For many retail customers, exchanging bank deposits for cash will be fairly inexpensive. A safe deposit box can be rented for less than € a year. If bank customers choose to withdraw their deposits and hold cash, banks will lose an important part of their funding. This is probably an important reason why banks in countries with negative policy rates are reluctant to set negative deposit rates, particularly for households. If banks hold back on deposit rates, lending rates can only fall to a limited extent before banks’ earnings are reduced. A lower policy rate will probably have a less-than-normal effect on lending rates, weakening the impact of monetary policy via the demand channel.
The financial crisis 2008–2009 hit households in Sweden through a large fall in GDP, a rapid increase in unemployment and housing prices that fell by 10–20 per cent depending on which statistics you use (Figure 1). The euro crisis has recently entailed a new stress test. Swedish households and mortgage borrowers have also passed this test with flying colours. The Riksbank’s inquiry into the risks in the housing market also observed that resilience in the Swedish mortgage market was good. It estimated the effects on the economy of a fall in housing prices of 20 per cent and concluded that the effects would be relatively small, particularly if they are counteracted by a more expansionary monetary policy.19 One important indicator of sustainability and resilience is the household saving ratio. Swedish households’ saving ratio is now historically high, while it was very low prior to the 1990s crisis, minus 3 per cent at its lowest (Figure 2). A high saving ratio means that households are increasing their real and financial assets and that their consumption is not funded by loans. A low saving ratio and a loan-funded consumption boom, which was the case in Sweden prior to the 1990s crisis and in the United States prior to the most recent crisis, is on the other hand problematic and not sustainable.

It takes a long view to recognise returns beyond profits where social and environmental gains are also equally valued. This will represent a major paradigm shift in many institutions. For this, strong and visionary leadership that sets the tone from the top, starting from the board and senior management, is certainly crucial. Far-sighted leadership to transform culture, systems and people will be central to this paradigm shift. To facilitate the process, the recently issued Strategy Paper on VBI will be complemented with an implementation guidance that is currently being developed by the Bank in collaboration with the industry. Second, VBI will require greater stakeholder activism through increased transparency on its adoption. This is a new initiative and it is imperative that our efforts go hand in hand with creating greater awareness and understanding of key stakeholders. The public sector and advocacy groups play an important role. But customers and business ventures should also play their roles wisely and use the power of their wallets to make informed choices. To catalyse this change, a value-based scorecard will be introduced to realign behaviours and expectations towards the desire to impact the community and the environment in a positive way. The scorecard will capture important dimensions of qualitative performance that are geared towards creating sustainable outcomes by Islamic financial institutions. The third critical area is adopting a collaborative approach to implementing VBI which will be key to mobilising change.
Despite this long-standing perception among some market participants that primary dealer status represents an endorsement by the New York Fed of a financial institution’s creditworthiness or ability to provide efficient execution of large transactions, we have repeatedly stressed the importance of other market participants’ engaging in their own assessment of potential counterparties’ capabilities. Recent history provides several reminders that the primary dealer designation provides no guarantee against credit risk or other counterparty risks. While the New York Fed certainly performs its own due diligence, we do so in pursuit of our unique business objectives, which may differ from those of private agents. Market participants should therefore be  7  Since July 2013, the Desk has conducted pilot programs with seven smaller firms outside of the primary dealer system in order to explore how to conduct open market operations in Treasury and mortgage markets with firms that are considerably smaller than existing primary dealers. The Treasury Operations Counterparty (TOC) and Mortgage Operations Counterparty (MOC) pilot programs have provided valuable insight into the appropriate size and operational capacity of open market operation counterparties. BIS central bankers’ speeches  3  engaging in the appropriate level of due diligence required by their fiduciary responsibilities in the context of their specific business requirements. Such independent assessments are in our collective interest because they foster market discipline and a safer, more secure financial system.

Before I begin, I would note that the views I share with you this evening are mine and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.1 Principles and objectives Throughout the history of Federal Reserve operations in financial markets, our approach to engaging with counterparties has been designed to serve the effective implementation of monetary policy. The New York Fed, through its Open Market Desk (the Desk), is in the business of implementing policy as directed by the Federal Open Market Committee (FOMC, or the Committee), and the Desk has demonstrated a willingness to engage with a wide range of counterparties to achieve this objective under the guidance of the Committee. In addition to its role in the implementation of monetary policy, the New York Fed has a number of responsibilities and duties as the fiscal agent for the U.S. Treasury. We have therefore also used our counterparty relationships to assist the activities we undertake in support of the Treasury. Indeed, for decades, the primary dealers have played a critical role not only in open market operations, but also in the underwriting and distribution of newly issued Treasury securities. In addition to carrying out these domestic operations, we stand ready to conduct a number of foreign exchange operations.2 Foreign exchange counterparties are essential to the successful implementation of U.S. foreign exchange policy operations, which are conducted by the Desk but directed and funded generally equally by the Fed and the Treasury.
The proposed legislation gives the SNB the authority to determine which banks and which bank functions are systemically important. Thirdly, the SNB should be given improved access to information that is necessary for macroprudential analysis. In this context, the Federal Council announced that it would look into ways in which the SNB could gain better access to information from banks in cases where FINMA does not have the requisite data available. To the extent that the existing legal basis does not provide adequately for this, the Federal Council intends to submit a proposal to Parliament in the near future. The SNB welcomes the progress made in the area of macroprudential policy in Switzerland. What is crucial now is that the appropriate measures are indeed implemented. This is all the more important in view of the fact that the risk of imbalances in the mortgage and real estate markets has increased over this past year. Moreover, owing to its focus on the minimum exchange rate, monetary policy is currently unable to react to potential imbalances in the mortgage market using the traditional instruments. We will therefore continue to work within the relevant committees towards a rapid implementation of an appropriate, streamlined macroprudential policy framework. The decision as to what framework will ultimately apply in Switzerland lies, however, with the policymakers. BIS central bankers’ speeches  3

Michael C Bonello: The euro and beyond Welcome address by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Conference “EMU Governance and Euro Changeover – Malta on the Path to the Euro”, Valletta, 1 October 2007. *  *  *  Prime Minister, President of the European Central Bank, Mr. Jean-Claude Trichet, Commissioner for Economic and Monetary Affairs, Mr. Joaquin Almunia, Excellencies, Distinguished Guests, Ladies and Gentlemen, Malta’s forthcoming adoption of the euro represents the final step in the country’s integration in the European Union (EU) and is clearly a major milestone in its economic history. The presence here today of such a distinguished gathering indeed testifies to the importance of the occasion. I therefore would like to start by joining the Prime Minister in extending a warm welcome to President Trichet, Commissioner Almunia and our other guests from abroad, including the Governors and other senior officials of twenty-two national central bank members of the European System of Central Banks. Reaching this milestone has by no means been an easy task. At the level of macroeconomic policy, difficult decisions were called for, and taken, to start addressing existing imbalances and other impediments to growth in order to satisfy the Maastricht criteria. As for the logistics involved in preparing for the change of currency, a wide-ranging effort has been undertaken during the past two years to mobilise both the public and private sectors and to coordinate preparations at a national level.
At the same time, growth in the economy was so strong that a higher interest rate would not increase the risk of a deflationary recession to any significant extent. The interest rate increase of 0.25 percentage point was in itself modest. We did indicate, however, that it was more likely that the next change in interest rates would be an increase. Growing evidence of continued pressures in the economy emerged during the summer of 2000. The wage settlement resulted in an increase in labour costs of about 5 per cent in both 2000 and 2001. The projections for price and cost inflation in the years ahead were revised up as a result of the higher rise in labour costs, a weaker effective krone exchange rate and stronger external inflationary impulses. It appeared that the growth pause in the Norwegian economy would be shorter than expected. Against the background of an upward revision of the projections for price and cost inflation in the next few years, Norges Bank decided on 14 June to raise the interest rate by 0.50 percentage point. This was followed by another increase of 0.50 percentage point on 9 August. We then indicated that it was more likely that the next change in interest rates would be an increase, but also stated that substantial steps had been taken in the adjustment of the interest rate that was appropriate on the basis of our analyses.

Jarle Bergo: Monetary policy and business cycles Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at Kunnskapsparken Bodø, 25 September 2003. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 17 September and on previous speeches. The Charts in pdf can also be found on the website of the Norges Bank. *  *  *  The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. The inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. The inflation target also provides a framework for monetary policy’s contribution to stabilising output and employment. This intention is also expressed in the Regulation on Monetary Policy. High demand for goods and services and labour shortages normally point to higher inflation. When interest rates are increased, demand falls and inflation is kept at bay. When demand is low and unemployment rises, inflation will tend to slow. Interest rates will then be reduced. Norges Bank sets the interest rate so that future inflation will be equal to the inflation target of 2½ per cent. The interest rate has been reduced since December last year in response to the change in the inflation outlook.