samchain/econo-pairs-v1 huggingface dataset:
24 of Keynes, J M (1936), The General Theory of Employment, Interest and Money, Macmillan Cambridge University Press. BIS central bankers’ speeches  1  Having monetary, macroprudential, and microprudential policy under one roof makes gains from trade possible. It is our duty to exploit complementarities, synergies and economies of scope to maximise our impact by working together. To do so, we need research. And to some extent, research needs us. The need for research The way central banks have sought to achieve their objectives – the practice of central banking – has frequently moved ahead of the theory of central banking. Theory, in turn, subsequently catches up, and enriches and refines practice. The history of central banking is replete with examples. Tacit knowledge has often been more instrumental in determining policy outcomes than insights from formal research. Sometimes this works, as in Bagehot’s “dictum” (to lend freely at a penalty rate against good Montague Norman’s “never explain, never excuse”. 2 Research has meant that some modes of operation, like Norman’s, have rightly fallen by the wayside. It has helped nuance others, like Bagehot’s. And it guides us as to which practices to retain, reinforce and enhance, and which should be discarded. The practice of monetary policy in the Great Moderation is another example. It informed theorising and research on Inflation Targeting. And, in turn, through trial, error and refinement, research has helped inform policy with empirical insights and workhorse models.

Another issue that may be relevant here is the implication of a firm that has a balance sheet that looks like that of a bank but does not have direct access to the lender-of-last resort. Finally, and especially in light of the issues just raised, I think it is important for me to emphasize that the bank supervisors have expressed a clear willingness to listen to what the banking community has had to say on the issues involving electronic and Internet banking. Regulation E, promulgated by the Board of Governors, implements the Electronic Funds Transfer Act of 1978, and establishes primarily for consumer protection purposes the basic 7  See Royal Bank of Canada, et al., 83 Fed. Res. Bull. _____, (Order approved Dec. 2, 1996). Integrion also stated that it will not function as an Internet service provider, but will provide a secure electronic link to one. 9 See Notification to the Board of Governors Regarding Investment in Marketware International Inc. of Toronto Dominion Bank (Dec. 19, 1996). 10 See OCC Interp. Letter No. 742 (Aug. 19, 1996). 8  BIS Review 17/1997  -5-  rights, liabilities, and responsibilities of consumers who use, and financial institutions who offer, retail electronic funds transfer services.11 Among the protections provided are required disclosures, error resolution procedures, and loss protection.
5  See NOU 1991: 28, ”Mot bedre vitende? Effektiviseringsmuligheter i offentlig sector” (only available in Norwegian). BIS Review 50/2006  5

European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 3 February 2011. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting. Based on its regular economic and monetary analyses, the Governing Council confirmed that the current key ECB interest rates still remain appropriate. It therefore decided to leave them unchanged. Taking into account all the new information and analyses which have become available since our meeting on 13 January 2011, we continue to see evidence of short-term upward pressure on overall inflation, mainly owing to energy and commodity prices. This has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon. At the same time, very close monitoring is warranted. Recent economic data confirm the positive underlying momentum of economic activity in the euro area, while uncertainty remains elevated. Our monetary analysis indicates that inflationary pressures over the medium to long term should remain contained. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The continued firm anchoring of inflation expectations is of the essence.
For example, Adrian and Shin (2008) demonstrate that the balance sheets of US broker/dealers expand when monetary policy is accommodative. 6 Similar evidence is provided for the US repo market by Gorton and Metrick (2009), who found that activity started to increase significantly from 2001 – that is, at a time when monetary policy in the US was relatively loose following the bursting of the dot-com bubble. 7 Acharya and Schnabl (2010) provide similar evidence related to the asset-backed commercial paper (ABCP) market. 8 In summary, if the process that has been set in motion under the aegis of the G20 has the potential to place a whole new segment of finance under regulatory scrutiny and oversight, the new collateral-based finance can give a central bank stronger influence over financial and macroeconomic conditions more broadly. 5. Monetary policy in a high-debt environment  I mentioned earlier that collateral is likely to play a growing role in the functioning of capital markets. Demand for collateral is thus likely to increase. But, given the collapse of securitisation activity during the crisis, we could imagine that the current decline in the creation of securitised assets might become a permanent feature of the new landscape. There will be fewer ABSs created out of bank books. Sovereign debt will certainly be widespread. It will probably replace ABSs in the collateralisation of secured lending. Unlike in the past, the risk characteristics of this type of debt instrument will be more graduated than was considered possible only few years ago.

When a central bank takes decisions on the policy rates, it directly affects the marginal price of leverage for these financial institutions. 4 As a result, the behaviour of financial intermediaries – which, by their nature, have high levels of leverage – can be strongly influenced by even small changes in short-term rates. 5 In  3  See Figure 3.1 of T. Adrian and H.S. Shin (2009), “Financial intermediaries and monetary economics,” Handbook of Monetary Economics, forthcoming. 4  See: T. Adrian and H.S. Shin (2009), “Financial intermediaries and monetary economics,” Handbook of Monetary Economics, forthcoming. 5  See: R.G. Rajan (2005), “Has financial development made the world riskier?” Proceedings of the FRB Kansas City Jackson Hole symposium “The Greenspan years: Lessons for the future”; and F. Allen and D. Gale (2007), Understanding financial crises, Oxford University Press. BIS Review 83/2010  5  other words, short-term interest rates are important in and of themselves, not only because they influence longer-term rates and other asset prices via expectations of future short-term rates, but also because they change the liquidity conditions faced by a large portion of leveraged institutions. A number of empirical studies have explored this issue. In line with the assumption that lower short-term interest rates reduce the cost of leverage and thus encourage an expansion of intra-financial sector transactions, these studies find that money market activity, particularly in the secured segment, expands when monetary policy is accommodative.
There are prospects that house prices may show a fairly sharp rise between 2003 and 2004. Buoyant activity in the housing market and high house prices are contributing to strong growth in credit to households. The household debt burden has shown a considerable increase and is expected to rise further in the period ahead. A high debt burden means that an increase in interest rates to a more normal level may have a relatively pronounced impact on household income and hence consumption growth. The difference in growth in credit to households and non-financial enterprises is a good illustration of Norway’s dual economy. Over the past few years, credit growth has been far higher for households than for enterprises. The level of household credit growth has remained high recently. An important reason is the sharp rise in house prices in recent years. Low investment demand is reflected in credit to non-financial enterprises, which has declined to a very low level. Developments in prices for commercial property compared with house prices also indicate that the situation is better for households. Developments in mainland enterprises have been characterised by low output growth, falling investment and declining profitability in many industries. In order to boost returns on invested capital, enterprises have taken steps to reduce costs, primarily by reducing their workforce or relocating parts of their production abroad. By way of conclusion, I would like to present a summary of the economic outlook for the Norwegian economy.

Basle II is a step in the right direction in many ways, particularly in its treatment of off-balance sheet vehicles and in stimulating improved risk management systems, but it still has known pro-cyclical features which we need to address. If we cannot do so effectively an alternative may be to require larger capital and liquidity buffers across the whole cycle. The past seven months have been testimony to Mark Twain’s comment that “history doesn’t repeat itself but it does sometimes rhyme.” The structured credit markets and the growth of “originate and distribute” banking have amplified the turmoil in credit markets in recent months. But under the new clothes, the old credit cycle is still recognisable. It is important we learn the lessons about the new credit instruments and markets. But we also need to address again the roots of the credit cycle.
Let me quickly go over some of the most important changes to the primary market: •  Following the liberalization of interest rates in 1992 the auction system for Treasury bills was introduced to create a more transparent and market-based system of price determination that would encourage broader investor participation. •  Alongside the introduction of the auction system, the maturity structure was extended from the only existing term of 91 days to include 28 and 182 days in order to meet the various liquidity needs of investors. •  In 1995, Government bonds with a maturity term of 12 month and 18 months were added to the list of securities. •  Following the increased depth of the market, the structure of Government securities was streamlined with the termination of the 28 day Treasury bill issuance and the subsequent introduction of the 273 days maturity term. •  In 2005, reforms of the Government securities market continued with the cessation of the 12 months and 18 months Government bonds. In their place, a 364 day Treasury bill was introduced alongside the 3 and 5 years bonds. •  More recently, in August 2007, a portfolio of Government bond maturity terms was further increased to include the 7, 10, and 15 years. Since that period, the size of the outstanding issues has grown from 7% of GDP in 1994 to 17% by the end of 2007. With regard to secondary market, policy efforts have been initiated at different stages in the development of our market.

You may wish to know that the Bank of  2  BIS Review 26/2008  Zambia and the Lusaka Stock Exchange are already engaged to develop an efficient settlement stream within the RTGS payments system. It is my belief that once this initiative has been fully developed, settlement risk will be reduced and more credibility will be added to securities trading. Chairperson, I know there are still formidable challenges in building a vibrant secondary market. Hence, in my concluding remarks, let me reiterate what I said earlier; that setting the primary market off the ground has been a challenging task. To set up secondary markets is even a more challenging task. Yet it is not an impossible one. With the participation of every stakeholder, the challenges that seemingly look insurmountable can easily be overcome. We all know that the development of a vibrant secondary market for securities is necessary. When I look at all of you gathered here this morning, I see a determined optimism that we can get there. Each and every one of us has a role to play, be it Government, corporate institutions, or indeed a small investor. On our part as Bank of Zambia, you can rest assured that we will continue doing our part in facilitating the development of this market. Thank you very much and I wish you a very successful workshop. BIS Review 26/2008  3
External debt is now only 60% of GDP compared to 90% at its peak. Financial institution performance in Thailand has also strengthened considerably. Last year the banking system recorded an operating profit of 0.68 % on assets, boosted by both improved interest income and fee-based income. The transfer of non performing loans to the government owned, Thai Asset Management Corporation, has reduced the NPL ratio in the banking system to 11.5%. With less need for provisioning, the average BIS ratio of the Thai banks now stands at approximately 13% at the end of March this year. BIS Review 44/2002  1  Last week the Thai authority also finalized the measures to deal with losses from the financial sector intervention. The government will fiscalize the losses by issuing bonds to cover them in full. The servicing of the interest rates will be entirely from the government budget. The retirement of the principals will be borne by the central bank. But it will be paid out of the central bank's future yearly profits which would be earned mostly from the international reserves and would normally be paid over to the government in its yearly appropriation of the profits anyway. Thus the scheme will not affect the Bank of Thailand's ability to formulate monetary policy in the future. The scheme also makes more clear the path of fiscal deficit in Thailand.

Add to this that monetary policy interest rates are at their all-time lows, with which the capacity of central banks to increase the stimulus is also limited. In short, the tools traditionally used to boost growth have little room for maneuver in the developed world. Another source of risks that is being increasingly debated is the possibility of developed economies, especially the U.S., enduring a long time of slow growth. Excessive private debts, particularly of households, and public debt, combined with weak labor markets, are determinants of this assessment. This could shape a similar situation to that of Japan after the bursting of its housing bubble in the late 1980s, which gave way to a period of stagnation that has seen no end. Although we believe this to be an unlikely scenario, its consequences on the global economy could be severe. Amidst these conditions, emerging economies continue to grow strongly. The risks of overheating we saw only a few months back have diminished, partly because of the very action of the adopted economic policies and, especially, of monetary measures. There are still risks, however. For one, it is obvious that if developed economies continue to lag, the external demand facing the emerging world will fall, hurting their growth potential. Although in the current scenario some dynamism and a certain degree of decoupling are expected, this cannot go on indefinitely. Given the weakness of domestic demands in developed countries, they rely on their exports to grow and to resolve their global imbalances.
This MSPE is shown using different-sized data samples for estimation of the model, ranging from 20 days (one month) to 250,000 days (one millennium). When sample sizes are small, simpler models are unambiguously superior (Charts 12 to 13). With highly imperfect information, adding model complexity simply increases prediction errors. Indeed, in this hypothetical setup, for samples smaller than around two years, the simple model does better even than the true model. Simple does not just defeat complex; it trumps the truth. As the sample size expands, model uncertainty decreases and prediction errors fall. The performance of the complex models begins to improve relative to the simple ones. In general, prediction errors converge to a U-shaped pattern centred on the true model, with models which are either too simple or too complex inferior. This is a standard statistical finding. But it is only at sample sizes in excess of 100,000 days (400 years) that estimates of the “true” model outperform a much simpler one. Moreover, the simple model is only materially worse than complex models when the sample size rises to around 250,000 days (1,000 years). According to this experiment, the sample sizes which would be necessary for complex models to outperform much simpler ones are very large indeed. This experiment is only illustrative, as it is based on a hypothetical distribution. By drawing on actual financial market data, it is possible to assess more precisely the impact of model complexity and sample size on out-of-sample performance.

Nevertheless, efforts are made constantly for fulfilling the necessary legal framework and procedures, covering all possible directions of its activity. Simultaneously, there is worked in terms of organizing the structure, increasing the institution’s staff number and training. Emphasis is laid on the DIA’s cooperation with the Bank of Albania, the supervisory authority, so that the DIA carries out its functions effectively. At the same time, the relation with the Ministry of Finance is taken into consideration in organizing the Deposit Insurance Agency’s structure, so as to have the solid presence of the state in it. The forms of this cooperation are numerous, but all of them should be first consolidated under normal conditions of the banking system activity. The main elements of this cooperation are: •  Exchange of information on supervisory practices and observance of regulatory requirements by the insured entities;  •  Organization of joint trainings in getting acquainted with respective functions;  •  Acquaintance with and discussion on manuals and procedures requiring the commitment of both institutions in certain cases, and the testing of these procedures. The Bank of Albania and the Deposit Insurance Agency are working for enhancing this cooperation constantly. 2/3  A number of legal and regulatory alterations that are being prepared in parallel by both our institutions, and the exchange of information, as well as more frequent contacts between both institutions serve this purpose.
All of these factors may permanently lower the path of potential output. As I said in the fall of 2010 and I repeat the message again today: I think state-contingent policies such as those I just described are a productive way to provide such necessary monetary accommodation. There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape. It is imperative to undertake action now. References Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans, 2005, “Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy”, Journal of Political Economy, February, Vol. 113, No. 1, February, pp. 1–45. Chung, Hess, Jean-Philippe Laforte, David Reifschneider and John C. Williams, 2010, “Have We Underestimated the Probability of Hitting the Zero Lower Bound?”, at the conference, Revisiting Monetary Policy in a Low Inflation Environment, Federal Reserve Bank of Boston, October 13. Eggertsson, Gauti, and Michael Woodford, 2003, “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, Vol. 34, No. 1, pp. 139–211. Federal Open Market Committee, 2011, Minutes of the Federal Open Market Committee, January 25–26, Board of Governors of the Federal Reserve System, February 16. Krugman, Paul R., 1998, “It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap”, Brookings Papers on Economic Activity, Vol. 29, No. 2, pp. 137–206. Reinhart, Carmen M., and Kenneth S. Rogoff, 2009, This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press.

Karolina Ekholm: Do global imbalances pose a risk to the Swedish economy? Speech by Ms Karolina Ekholm, Deputy Governor of the Sveriges Riksbank, at the Stockholm Chamber of Commerce, Stockholm, 13 June 2011. *  *  *  The views expressed in this speech are my own and are not necessarily shared by the other members of the Riksbank’s Executive Board or the staff of the Riksbank. I would like to thank Hanna Armelius for all her help in writing this speech. Financial crises often come as a surprise. After the event, however, it may be a simple matter to look back and see all the flashing warning lights that should have signalled that things were about to go seriously wrong. I do not think many people realised how vulnerable the global financial system really was before the latest crisis, and consequently this crisis came as a surprise too. However, there were people who did see warning lights flashing. The problem was that they appeared to be flashing for a different type of crisis than the one that eventually arrived. What we expected to arrive was an international crisis triggered by a collapse in the real value of the dollar. 1 The warning lights began flashing due to the major global imbalances arising from the fact that that some countries, above all the United States, had substantial and persistent current account deficits while others, for example China, had substantial and persistent current account surpluses.