samchain/econo-pairs-v1 huggingface dataset:
•  Firstly, nominal convergence, which is requested in order to adopt the euro, must be sustainable and therefore constitutes a medium-term objective, rather than a short-term priority. Indeed, the EU Treaty calls, as a prerequisite for adopting the euro, for a high degree of sustainable convergence in the fields of price stability, government fiscal position, stability of the exchange rate, and long-term interest-rate levels. Therefore, nominal and real convergence should be pursued in parallel, and are not antagonistic, in the interest of both accessing countries and the euro area. •  Secondly, I note that many accession countries have already expressed their intention to join ERM II as soon as possible after EU entry. This intention is to be welcomed. However, it should be clear that the ERM II is not expected to be adopted by new members immediately after EU accession, nor is intended to be limited to only two years, which is the minimum period of time prior to adopting the euro. It would be misleading to consider ERM II as a mere “waiting room” before euro. On the very contrary, ERM II is to be considered as a “training room”. This mechanism will allow countries to retain some limited exchange rate flexibility during the catching-up process.

In light of recent developments, I am optimistic about the economic prospects for the Bronx and local small businesses. I also believe that community banks and community development organizations have an important role to play in paving the way forward. As always, my comments today reflect my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. 1 The economic outlook for the Bronx To appreciate where we are, we need to remember where we’ve been. Those of you who are long-time Bronxites know that starting in the 1950s, but especially during the 1970s, the Bronx endured a massive economic slump. In that one decade, the 1970s, the borough’s population fell by 20 percent – and by even more in many well-established neighborhoods. As people moved out in droves, buildings were abandoned, crime increased and jobs vanished – all in a vicious cycle, creating an atmosphere of despair. Yet, the borough persevered and conditions began to stabilize and then to even improve a bit in the 1980s. Today, while there is still much progress to be made, the Bronx is in dramatically better shape on many dimensions: its economy has been growing at a brisk pace, its population is on the rise, its housing stock is being rejuvenated and many businesses are thriving, creating strong job and income growth. This is particularly evident in neighborhoods like Hunts Point and the area around Yankee Stadium, down to the Bronx Terminal Market and beyond.
Even varying just this one thing, the two-year inflation forecast was half a percentage point higher in the second case than in the first. And, in the meantime, we also know that these global pressures are not the only determinant of future inflation. Arithmetically, domestic pressures have been less important so far. But the domestic labour market has also come under increasing strain through the course of this year. I now want to have a look at the latest evidence in this area. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Unemployment higher than before the pandemic but the labour market nonetheless looks very tight As we saw earlier, while the economic recovery this year has been predictably rapid, cumulative growth over the period of the pandemic as a whole – taking account of the deep trough from which the economy was having to recover – has not been as impressive. In the third quarter of this year private-sector output grew by a little less than we’d anticipated in August and was still 2% lower than at the end of 2019Q4. In contrast, employment growth was stronger than we’d expected and unemployment fell further (Chart 13). And, although in the three months to September it was still a little (0.3 percentage points) higher than just before the pandemic, and still slightly above the MPC’s existing estimate of the long-run “natural rate” of unemployment, other indicators point to a much tighter labour market.

- N21 MPR  3.5 2023 2024 Unemp. - Scenario  Sources: ONS and Bank calculations. In the literature estimates of the policy lag seem to vary quite a bit. In Cloyne and Hurtgen (2016, ‘The macroeconomic effects of monetary policy: a new measure for the United Kingdom’, American Economic Journal: Macroeconomics), the authors find that the peak effect of changes in UK monetary policy takes well over two years to come through. Cesa-Bianchi, Thwaites and Vicondoa (2020, ‘Monetary policy transmission in the United Kingdom: a high frequency identification approach’, European Economic Review) provide evidence of material effects after barely a year. 2  4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  In other words, there would’ve been no way to control inflation in prices but, at the same time, leave nominal wages and nominal household incomes untouched. It’s sometimes been suggested that, had monetary policy acted to suppress it, consumers might have been protected from this rise in the cost of living. Unfortunately, that’s not true. At a fundamental level this is because monetary policy cannot, over the long run, offset real economic shocks. If structural productivity grows more slowly, for example – as it did after the financial crisis – then, ultimately, real wages will do so as well, no matter what happens to monetary policy.
These purchases were funded primarily by increasing the stock of reserve balances in the banking system, which compelled changes in the operating framework the Fed uses to achieve interest rate control.4 With an abundant supply of reserve balances, variations in their supply— the mechanism through which the Fed implemented monetary policy before the crisis—would no longer cause meaningful changes in federal funds rates or other money market rates. Implementation of monetary policy therefore required a new operational approach. The Fed’s current policy implementation framework uses a system of rates that it directly administers to influence the level of short-term interest rates, without needing to actively adjust the supply of reserves. Specifically, the Fed uses the rate of interest paid on excess reserves (IOER) held by depository institutions as its primary tool for keeping the federal funds rate in its target range. It supplements this tool by offering overnight reverse repos (ON RRPs) at a specified offering rate to a broad set of counterparties, including eligible money market funds, government-sponsored enterprises, primary dealers, and banks.5 Together, IOER and ON RRPs set a floor on rates, beneath which bank and nonbank financial institutions with access to these facilities should be unwilling to lend funds.6 This framework has been working very well. Since December 16, 2015, when the FOMC began the process of normalizing the stance of monetary policy, it has raised its federal funds target range four times to a current range of 1 to 1¼ percent.

Stress testing is an example of a top-down tool we could consider: does the capital position suggested by the detailed, bottom-up modelling deliver resilience at both firm- and sector level to common, real world shocks that we can reasonably expect them to withstand? Stress testing may not be the only additional tool. The government has an objective of facilitating productive investment to aid recovery and adaptation – not just to the structural changes wrought by the experience of the pandemic, but also to the equally severe, long term threat of climate change. Insurers are embracing the part that they can play in financing the transition to a net zero carbon economy with their long term investment. But many of the projects that take us to net zero will be innovative and lacking an historical track record: there is a legitimate concern that the riskiness of such projects will be overstated by capital modelling that relies heavily on historical data for its inputs and for validation. At the same time the prudential regime has to reflect the economic risks involved. We are interested in the possibility for equally innovative risk measurement tools that have the flexibility to cope with any such bias in existing modelling methods, and deliver a balanced risk assessment: I welcome your thoughts on this directly or in responses to the Solvency II call for evidence. Conclusion In finance, the ‘Greeks’ have become synonymous with the inner workings of models for pricing derivatives – a fox-like activity if ever there was one.
Karolina Ekholm: Monetary policy, business cycle stabilisation and macroprudential policy Speech by Ms Karolina Ekholm, Deputy Governor of the Sveriges Riksbank, to a meeting at the Confederation of Swedish Enterprise, Stockholm, 13 March 2013. *  *  *  The views expressed in this speech are my own and are not necessarily shared by the other members of the Executive Board of the Riksbank. I would like to thank Kerstin Hallsten, Kerstin af Jochnick, Cecilia RoosIsaksson, Lars E. O. Svensson, Anders Vredin and Barbro Wickman-Parak for their comments and Magnus Wiberg for help with drafting the speech. As I am sure most of you know, I have in recent years advocated a more expansionary monetary policy than the policy that has actually been conducted. That I have done so recently, when the growth of the Swedish economy has been relatively weak, is perhaps not so surprising. On the other hand, it may be more difficult to understand the reasons for my stance in 2010, when the Swedish economy had growth rates of over 5 per cent. However, as I intend to explain today, I believe that demand has been too low in Sweden ever since the global financial crisis seriously affected the Swedish economy in the autumn of 2008. The low level of demand is ultimately the result of weak economic development around the world, which is subduing the demand for Swedish exports and making households and companies more pessimistic.

Most analyses indicate that the policy rate has very little impact on housing prices and thus also on household indebtedness.17 Using the repo rate would be justified if what we were seeing was a credit boom throughout the Swedish economy. But this is not what we are seeing. Household indebtedness is increasing at approximately the same rate as disposable incomes. The rate of growth in bank lending to companies typically varies with the business cycle, and at present this rate is low (see Figure 11). All in all, credit growth is relatively low in the Swedish economy. Figure 11. Lending to households and companies from monetary financial institutions Annual percentage change 20  20  15  15  10  10  5  5  0  0  -5  -5  Total lending from monetary financial institutions Companies Households  -10 03  04  05  -10 06  07  08  09  10  11  12  13  Source: The Riksbank. Another problem with using monetary policy to influence household indebtedness is that this also has an impact on the exchange rate. All else being equal, higher interest rates lead to a stronger currency and, again all else being equal, a stronger currency leads to lower inflation and lower resource utilisation. There are thus clear costs associated with using monetary policy in this way. The alternative – and a better one – is to separate monetary policy from the policy that aims to promote financial stability.
In order to ensure an orderly transition, it is vital that the changeover to SARON on the credit and derivatives markets occur as early as possible. The supply of SARON-based products on the credit market is increasing. For example, various banks have launched SARON-based mortgages in recent months. However, the SARON-based derivatives market is still significantly less liquid than its Liborbased counterpart – turnover on the SARON-based derivatives market remains considerably lower than turnover on the Libor-based market (cf. chart 4). As we do not have a consistently liquid government bond curve in Switzerland, the interest rate swap curve is very important as a reference for pricing fixed-interest loans and bonds. With the discontinuation of Swiss franc Libor, this critical reference function will be performed by the SARON-based interest rate swap curve. It is important that Libor-based contracts that cannot be switched to SARON before the end of 2021 are furnished with robust fallback clauses. The International Swaps and Derivatives Association (ISDA) has recently published such fallback clauses for derivatives contracts. Robust fallback clauses minimise the risks associated with the discontinuation of Swiss franc Libor, thereby providing a safety net. The SNB itself continues to make progress with the changeover to SARON – we will have no outstanding Libor-based derivatives in our investment portfolio by the end of 2021. Moreover, from end-2021, we will exclude all Libor-based floating-rate notes from the list of collateral eligible for SNB repos when implementing monetary policy.

For me today, it means that all current EU member states will contribute as much as they can to these improvements with their own ideas, knowledge and experience. The new ESCB members are prepared to contribute their share. They have gained a wealth of experience from a decade of economic transformation, a decade during which they used a wide variety of monetary policy strategies, from inflation targeting to currency boards, in order to deliver low inflation. Let me mention just a couple of lessons that were learnt: •  how to make decisions and produce good-quality economic forecasts when faced with large uncertainty (eg. about available data)  •  how to bring the economy back to low inflation after a series of supply-side shocks and how efficient communication is crucial in such circumstances  •  and that maintaining low inflation is much easier providing fiscal discipline and policy co-ordination can contribute to the task. These issues will surely be familiar to others. The knowledge gained during the transformation period will enrich the policy debates of the ESCB´s councils and working groups. This is how monetary integration will happen on a day-to-day basis both in countries that already use the euro and in those that will introduce it in the future. 2  BIS Review 70/2004
3  All speeches are available online at www.bankofengland.co.uk/speeches  3  But such big transitions take time. Workers generally cannot move seamlessly to new jobs in which they can be productive. The benefits of the First Industrial Revolution, which began in the latter half of the 18  th  th 7  century, were not felt fully in productivity and wages until the second half of the 19 . th  Indeed, at the start of the 19 century in the UK, despite a sharp pickup in productivity, wage growth stalled and the labour share fell – a period dubbed “Engels’ pause”. A Framework for Examining Technical Change and the Labour Market 8  To understand such dynamics it helps to have a common conceptual framework. The impact of technological change on employment and wages can be depicted as the sum of three major effects: destruction, productivity and creation. The destruction effect is the focus of most alarmist accounts: the replacement of labour by technology, with an associated reduction in labour demand, wages and employment. Less commonly acknowledged are the positive effects on aggregate demand of new technologies, what can be termed the productivity effect. This effect is analogous to the classic Say’s law in which supply creates its own demand. Technology makes those in work more productive, in time boosting wages and increasing the returns to those who own capital. This greater income boosts aggregate demand and leans against the destruction effect.

The wave of consolidation has, however, created mega-exchanges in the U.S. and Europe, and competition among them has proceeded at a furious pace. The Chicago Board of Trade (CBOT) faces a serious challenge on its home turf from Eurex, the all-electronic exchange owned by Deutsche Börse and the Swiss Stock Exchange. Eurex is now offering electronic trading in U.S. dollar denominated fixed income futures which have been the mainstay of the CBOT. The pan-European exchange, Euronext.Liffe, is offering electronic trading in Eurodollar futures contracts in direct competition with the Chicago Mercantile Exchange (CME). CME has responded quickly, announcing initiatives to accelerate the migration of its flagship Eurodollar contract to GLOBEX, its electronic trading platform. And just this month, it was reported that the New York Stock Exchange may enter the derivatives market too. Hardly a week passes without press reports of strategic moves by the exchanges. Securities exchanges have not been spared from the competition. London Stock Exchange (LSE) will launch its Dutch Trading Service, euroSETS, in May this year. This will allow the most liquid stocks listed on Euronext-Amsterdam to be traded through LSE. This bold move is being watched closely by the industry, and may challenge conventional wisdom on the contestability of stock exchange liquidity. The outcome of these contests could significantly alter the competitive landscape for exchanges in the next few years. Key drivers of consolidation and competition One key driver behind the consolidation and competition is technology. Exchanges and clearing houses are very much technology businesses today.
Ranee Jayamaha: The significance of payment reforms in financial system stability Opening address by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the seminar on “Payment systems and cheque imaging” organised by the Royalist Bankers’ Club, Colombo, 25 May 2006. *  *  *  Let me thank the President and members of the Royal Bankers’ Club for inviting me to deliver the opening remarks at the seminar on ‘Payment Systems and Cheque Imaging’. I am honoured to be speaking to this distinguished group and it is encouraging to note that the subject is of interest to a good cross section of the financial community. In my opening remarks, I will give an overview of the significance and rationale of payment reforms in financial stability and then set out the impact of payment reforms on the financial system, institutional arrangements that are in place, and the need to change payment practices of banks and the public. It may also be important to note that the term “Payment Systems” covers payments, clearing and settlement systems. As you are aware, the Central Bank’s role in the payment system stems from its primary function of providing payment, clearing and settlement service. Economic policy reforms, the ever increasing complexities in the financial system and the changing role of central banks have resulted in central banks to be at the center of payment reforms which, from the Central banks’ point of view, is helpful in achieving the objective of financial system stability.

The RTGS was implemented in September 2003 and the system facilitates large value and time critical fund transfers and settlements electronically and on real time. In February 2004, the SSSS module was integrated to the RTGS System. To facilitate the operations of these systems, government securities are issued in scripless form and the system facilitates simultaneous transfer of government securities and settlement of funds through the RTGS on a Delivery versus Payment basis. The Central Bank continues to upgrade and enhance facilities to these two systems and in December 2005, the internet based facility called LankaSecureNet which enables the account holders of the Scripless Securities Depository System to obtain up to date details of their investments through the internet was introduced. While eliminating the systemic risks that was involved in the high value and time critical transactions, the Central Bank became the owner and operator of both the RTGS and SSS systems. The service provider of the retail payment system is LankaClear (Pvt) Ltd which is owned jointly by the Central Bank and the commercial banks. Two weeks ago, LankaClear (Pvt) Ltd introduced the Cheque Imaging and Truncation System to ensure that cheques deposited in any part of the country is cleared and settled within two days except in uncleared areas. The cheque imaging system eliminates regional disparities in cheque clearing and establishes a common clearing schedule. In addition to these two systemically important payment systems, there are other small scale payments and settlements arrangements.
He must take a view on whether this would introduce an avenue for political interference in the work of the HKMA, in particular in monetary management. He must also take a view on whether this would undermine the effectiveness of the relationship between the Administration, in particular himself, and the HKMA. 28. Insofar as getting things done at the technical level is concerned, for example in achieving the broad policy objectives of monetary and banking stability, and the development of the financial infrastructure, the existing relationship between the Administration and the HKMA has worked well. The Hong Kong dollar exchange rate has remained very stable and the banking system robust, and Hong Kong now has one of the most sophisticated financial infrastructures in the world. BIS Review 87/1998  -7-  29. It is of course up to the Administration to consider whether, for political reasons, the unusual arrangements for the appointment of the Monetary Authority and the framework defining his accountability should be looked at. But it should be remembered that those unusual arrangements had the agreement of the Legislative Council as recently as late 1992 when it approved the required amendments to the Exchange Fund Ordinance. Admittedly, the details of the amendments then reflected expediency dictated by political considerations at the time. But the arrangements have worked well for Hong Kong. 30.

Our critics have told us that we should not have squeezed so hard on interest rates last October and that we should not have increased the cost of borrowing for business and for those who have to service their home mortgages. We should have introduced our measures to strengthen our monetary and financial systems earlier. We should not have departed from our free market policy and intervened in the stock and futures markets. That there was a lack of a “sense of crisis” in how we handled the situation. These are the more significant criticisms. 4. I can fully understand the sentiment behind these criticisms. The people of Hong Kong have been suffering the worst conditions we have had to face for many years. Even the most patient and understanding community will have grievances when the value of the assets they hold has been halved while they have to pay significantly higher interest costs for their liabilities. Furthermore, income has not been growing, and, for some, it has been shrinking. And, worse still, the probability that they may lose their jobs has doubled in the past year. 5. So, whatever the cause of this difficult situation, whether or not it arose from events outside the control of the authorities, it is considered, and rightly so, the responsibility of a caring government to do what it can to relieve these grievances. Refusal or reluctance to do so, even for very sound reasons in the larger long-term public interest, is not looked upon kindly.