samchain/econo-pairs-v1 huggingface dataset:
I don’t want to repeat that speech – I am conscious that you may already have breached your pain thresholds by having to listen to this one, although in these times of remote working it’s of course easier for you to just put me on mute and reply to some emails until we get to Q&A. Instead, I would like to close with some very brief personal reflections on insurance, models, and capital. Whole balance sheet modelling is fundamental to understanding the risk profile of large insurers. But as with any modelling process, amidst all the detail and complexity of Solvency II internal models we risk being precisely wrong. We need more explicit sanity checks and a conversation about resilience to big, plausible risks – the kind of conversation that should be a cornerstone of the relationship between the PRA and regulated firms at board level. And we need ways to ensure that we recognise that while some areas are relatively easily modelled, others are not. I suspect that these basic, common sense points have got somewhat lost in the wake of the detailed, bottom-up model development and approval processes prescribed by Solvency II. Supervisory stress tests are one way into this. Judging from the ABI agenda following Charlotte’s speech she managed to get some insurers’ attention on this point. But there is no need for alarm – we do not intend some radical departure from the current ways of setting capital requirements.

Initially this appeared to be related to the impact of the global slowdown on some of the larger Eurozone economies, which seemed likely to cause them to run further below capacity than had earlier been expected. But the more recent signs are that the Eurozone economy is now picking up relatively strongly, and it is harder to understand the euro’s continuing weakness in the present context: it may just be a matter of time - for there is no doubt that the euro has considerable scope for appreciation. Taken together, Mr President, these various international developments since I was last here in Belfast have greatly complicated the task of monetary management here in the UK - in fact it has been just about the most difficult external environment that I can recall. At that time monetary policy was still aimed at moderating the pace of domestic demand growth to prevent the re-emergence of inflationary pressure - including wage pressures in the labour market. We actually raised rates by ¼% to 7½% shortly after my visit - but I promise you that was not a direct result of my visit here. But we reversed engines fairly aggressively when evidence of the effect of global slowdown on our own economy began to appear in the autumn - cutting interest rates from 7½% to 5% between October 1998 and last summer.
Even though, in August and September, there was still frequent talk of an imminent overheating and markets were expecting a further increase in interest rates, we did not become active. It seemed likely to us that the signs of a slowdown would soon become more marked both in Switzerland and abroad. This stance was not without risks. In monetary policy, as elsewhere, one occasionally needs some good luck. In the current environment, we consider the position of the target band to be appropriate. The Libor rate has sufficient leeway in the 3% to 4% bracket to reflect current fluctuations driven by the market. Of course, we will carefully observe and analyse ongoing developments and take action if necessary. Our mission is clearly oriented towards achieving a high degree of price stability in the medium term while taking into account the economic development. Two years of experience with the euro has taught us that living as a dwarf moving among giants is a reasonable strategy. It has allowed us to implement our own policy and at the same time to retain our traditional interest rate bonus, a significant economic advantage. Rather than obstructing our monetary policy during this time, the floating exchange rate has facilitated, even supported it. When we wanted to pursue an expansionary course in 1999, the Swiss franc remained weak. And when, in the first quarter of 2000, we took corrective action by adopting a more restrictive course, it appreciated against the euro without overshooting.

1973, P. 208  BIS Review 2/2001  1  against the yen. It took place in an environment where neither current nor expected inflation differentials have changed to any noticeable extent. Second, the volatility of floating exchange rates by far exceeds the volatility of the fundamentals. It is impossible to explain short- and medium-term exchange rate fluctuations with the aid of traditional fundamental factors such as inflation and productivity differentials. Against the background of such experiences, it is hardly surprising that two considerations characterise the ongoing discussion on currency regimes. First: Floating versus pegging is not a question of right or wrong. What seems appropriate for one country may be a bad choice for another economy. Structural differences in trade flows, productive capacities, features of the financial sector and the credibility of the political process may result in different choices. Second: Even among ardent protagonists of floating the dogmatic position that central banks should take an attitude of benign neglect towards exchange rate movements is out of favour. The exchange rate is generally regarded as a core determinant of monetary conditions to be carefully taken into account when money market interest rates are set. This aspect of policy making is of particular importance in small and medium-sized, open economies. Short- and medium-term adjustments – Muddling through in ignorance Taking the Forex environment into account, however, does not mean actively steering exchange rates by fine-tuning. Such an endeavour would not only jeopardise stability goals.
25 The figure is taken from Andersson and Claussen (2017), who review different alternatives to inflation targeting. 12 [24]  negative supply shock may already have affected production and employment negatively and as monetary policy must also be tightened, the effect can be noticeable. This can make it difficult for the central bank to credibly commit itself to such a strategy. However, in the variation proposed by Bernanke, the central bank would not always have a price level target, but only when the interest rate has been cut so low that the lower bound is binding – it will thus be a temporary price level target. 26 In normal cases the central bank will have an ordinary inflation target of 2 per cent, just like today. The central bank’s communication can in this way continue to focus on the inflation target. At the lower bound the temporary transition to a price level target can be explained and communicated in terms of keeping the policy rate at the lower bound until the average inflation since the date at which the policy rate first hit zero be at least 2 percent. 27 One advantage with a price level target that is only applied at the lower bound is that one avoids the problem of needing to compensate for supply shocks that temporarily push up inflation, which one would need to do if the price level target always applied.

When it comes down to it, the inflation-targeting policy has functioned well for a long time, and problems only arose when there was difficulty making policy sufficiently expansionary, as a result of the lower bound, after the financial crisis. Raising the target would solve, or at least reduce, this problem. It would also only affect one parameter of the framework and would not entail any extensive revision of it. This means it would not be necessary to try to convince and explain the merits of a new system and deal with potential adjustment costs and teething problems. It is not always an advantage to hold on to as much of an old system as possible, but in this case I think it would be a good idea. Would the economic agents accept an inflation rate of 3-4 per cent? I think they would, especially as it would entail less of a negative interest rate in the future – something we now know from experience is perceived as unnatural and problematic in several ways. It could also reasonably mean that it would be less probable that one needs to employ purchases of various financial assets as a complement to policy rate cuts. Although the criticism of this part of the policy may not have been as sharp as the criticism of the negative interest rate, it has still arisen.
A key determinant of those effects will be the impact on inflation expectations. If households’ and businesses’ expectations of future inflation rise following the initial price shock, pressures for compensating rises in wages and prices are much more likely. Inflation expectations are difficult to measure, but surveys of households’ expectations have picked up since early 2005 (Chart 12). This partly reflects the rise in inflation during 2005-06. But expectations have remained elevated during 2007 despite the easing in inflation in the second half of the year. Conclusion After a long period of stability, we have experienced a major financial shock that has reverberated through the banking sector in all the advanced economies. It has calmed recently, but we should expect a prolonged period of discomfort for individual banks and the financial system as a whole. Unusually, this shock was not the result of bad loans at home  11  Evidence on housing equity is presented in Waldron, M and Young, Y (2006), “Household debt and spending: results from the 2007 NMG Research survey”, Bank of England Quarterly Bulletin, Winter, pp. 512-21. BIS Review 7/2008  5  but it will have an impact on growth through tighter credit constraints and by influencing expectations and confidence. We cannot be sure how large those effects will be but they pose a serious downside risk to growth. To make matters more difficult, we face a sharp rise in inflation in coming months as a result of rising commodity prices worldwide and a fall in our exchange rate.

Mr Bäckström discusses the Swedish economy in the 21st century  Speech given by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, at the Swedish Shareholders Association, held in Gothenburg on 22 November 1999. *  *  *  First a word of thanks for the invitation to Gothenburg to discuss the Swedish economy in the 21st century. A week or so ago the Riksbank raised the repo rate from 2.90% to 3.25%. The decision was based on the assessment of inflation prospects we had presented in the October Inflation Report and our analysis of economic statistics that had subsequently become available. By raising the instrumental rate now, we aim to contribute to the continuation of a favourable economic trend, with stable prices and sustainable growth. We made the increase somewhat larger than was expected so as to be in a position to leave the repo rate unchanged for the rest of this year, given that the Swedish economy follows the path predicted by the Riksbank. Under these circumstances there is no point in dwelling on current monetary policy and its conditions. Instead I shall be considering a couple of matters to do with growth conditions for the Swedish economy in the longer run. This has a topical flavour on the threshold of a new millennium, perhaps particularly so at a time when so much discussion refers to the so-called new economy.
However, it suffered from weak national implementation and a lack of enforcement at the European level. Enforcement of the SGP was built on a peer pressure mechanism among Member States. In the past, however, Member States proved to be reluctant to enforce adequate fiscal discipline on their peers. Moreover, decision-making bodies at the EU level were left with a  10  See A. van Riet (ed., 2010), “Euro area fiscal policies and the crisis”, ECB Occasional Paper, no. 109, April (http://www.ecb.europa.eu/pub/pdf/scpops/ecbocp109.pdf). 6  BIS central bankers’ speeches  significant degree of discretion regarding the implementation of the fiscal rules, notably following the 2005 reform.11 Incentives for ensuring sound national fiscal positions have as a consequence been insufficient. Member States failed to adhere to their medium-term budgetary objectives and only slowly corrected excessive deficits. As a result, a number of euro area countries accumulated large fiscal imbalances already in “good times”, instead of using opportunities for reducing public deficits and debt levels. Therefore, they were left with hardly any room for manoeuvre when the financial and economic crisis hit. In the wake of the crisis, the substantial underlying fiscal and structural weaknesses in a number of euro area countries, as well as the inability of the current governance framework to prevent the emergence of such imbalances, became very apparent.

BIS central bankers’ speeches  7  making, which should have much stronger powers, and would also mean stricter constraints on national budget policies. This kind of reforms would require a comprehensive change to the EU Treaty but, above all, an adequate mechanism to ensure their democratic legitimacy. Let me outline the ideal cornerstones of such a governance reform. First, to ensure fiscal discipline, all planned deficits of more than 3% of GDP and those in excess of a country’s medium term objective would need to be approved by all euro area governments. Second, past fiscal slippages would be automatically corrected in upcoming budgets without any room for discretion via the introduction of constitutional rules similar to the German “debt brake”. Third, all Member States would also agree to implement fines and sanctions in a quasi-automatic mode. Finally, with the introduction in 2013 of a permanent crisis resolution mechanisms, the European Stability Mechanism (ESM), those countries slipping in the progress with their macroeconomic adjustment programmes would temporarily loose financial autonomy. The institutional arrangements at both national and supranational level would also have to be strengthened. At the national level, independent budget offices would ensure reliable forecasts – a prerequisite for sound planning and implementation of budgets. At the euro area level this needs to be complemented by an independent entity with a clear mandate and a strong institutional framework to assess the implementation of fiscal rules.
There is also an undertaking that any changes to the content of the letter, and any changes to the delegations, shall be made public. These commitments provide important safeguards of the independence of the HKMA in its day-to-day operations. I should add here that there has never in the past been any instance of the Financial Secretary's overriding or bypassing the Monetary Authority in the exercise of these delegated powers. So we would not expect to see disclosures of this kind very often. Nor would we expect to see frequent changes to the content of the letter or the form of the delegations, for an important part of operational independence is that it should be stable and predictable, and not something that is tinkered with at whim. The Exchange of Letters will, I believe, provide a clear basis for the HKMA to continue to carry out its work with a high level of autonomy in the years to come. Conclusion These will, naturally, be years of challenge for Hong Kong: there have been very few times in Hong Kong when this was not the case. The HKMA, as Hong Kong's central banking institution, has its part to play in helping Hong Kong meet the challenges. It also has its own special challenges. The main challenges in central banking are to maintain a monetary and banking environment that is optimal for stable and sustainable economic growth, and, particularly in the case of present-day Hong Kong, an environment that is conducive to resolving our current problems.

Mention should also be made of the reduction in spending on unemployment benefits, by 21.9% relative to the initial 2015 Budget. This is due to the fall in unemployment and in the coverage rate of the contributory benefit, which is partly offset by a shift in beneficiaries to non-contributory benefits, such as reinsertion scheme income and economic assistance under the activation programme for the unemployed. Finally, a further decline in the interest burden on government debt is foreseen as a result of the reduction in interest rates. On the revenue side, the main measures include the application of the second phase of the corporate income tax reform, and the impact over a full year of the related personal income tax reform. It is estimated the budgetary cost of these measures will be offset by the increase in revenue attributable to greater economic activity. Specifically, tax revenue before assignment to local and regional governments is expected to increase by 6.2% relative to the 2015 budget outturn projection, and Social Security contributions by 6.6% compared with the  4  BIS central bankers’ speeches  initial budget for 2015, which, given the macroeconomic forecast and the impact of the aforementioned tax reforms, would signify a greater response by revenue to the pattern of economic activity than that historically observed.
Frank Elderson: All the way to zero - guiding banks towards a carbon-neutral Europe Keynote speech by Mr Frank Elderson, Vice-Chair of the Supervisory Board and Member of the Executive Board of the European Central Bank, at the conference on “The Role of Banks in Greening our Economies” organized by the European Bank for Reconstruction and Development and Hrvatska narodna banka, Frankfurt am Main, 29 April 2021. * * * It is a great honour for me to be with you today to discuss the role of banks in greening the economy. And I am very happy to delve into the topic of climate change at an event co-organised by the European Bank for Reconstruction and Development (EBRD) – an institution whose own work remarkably exemplifies what international cooperation can achieve in supporting the greening of the economy. Your commitment to meeting the goals set under the Paris Agreement is outstanding. It offers great inspiration to all of us in European institutions who are just as adamant about doing the same. As many of you know, climate change considerations feature prominently in the ECB’s ongoing monetary policy strategy review. But today I will focus on how they will be taken into account by ECB Banking Supervision. The challenge of climate change is daunting. This is certainly true for the consequences if climate change continues unabated, such as increased natural disasters and the loss of habitats and biodiversity. And it is also true for the transformation necessary to avoid these dire consequences.

In stress test parlance: this year’s test is “topdown”, whereas next year’s is “bottom-up”. As banks become better prepared to face the risks posed by climate change, they need to be led by people who are also better prepared to deal with these topics. When assessing the suitability of prospective members of the management body of banks, knowledge and experience of climate-related and environmental risks will be among the areas of general banking experience against which suitability will be assessed. Finally, we will seek to include an understanding of climate-related and environmental risks as a specific area of expertise within the collective suitability of a bank board. An environmental risk that is intimately connected to climate change, but also constitutes a risk in itself, is the loss of biodiversity. In our Guide on climate-related and environmental risks we single out biodiversity loss as one of the drivers of both physical and transition risk. It is becoming ever clearer that beyond climate-related risks, biodiversity loss could also be a source of material financial risks.9 More research needs to be done.10 At the ECB, we will follow these developments closely – and we encourage banks to do the same. Integrating international networks and European initiatives Much like the EBRD, the ECB is also part of global initiatives which promote international cooperation on joint solutions for climate change. Most prominently, the ECB is a member of the NGFS.
Besides, we have explicitly stated that the CBRT, in line with the strategy announced today, will not allow exchange rates to deviate from economic fundamentals, nor will it allow a deterioration in price stability and financial stability. I would like to reiterate that various measures will continue to be taken in the forthcoming period, in order to ensure price stability. 3. Risks and monetary policy  Distinguished Members of the Press, In the last part of my speech, I would like to mention risks regarding the inflation outlook and how the monetary policy will be shaped should these risks materialize. The fact that inflation will hover above the target in the short term poses risk to inflation expectations and price setting behavior. Accordingly, as of October, the CBRT has adopted a policy stance aimed at eliminating these risks. These risks will be closely monitored and the necessary measures will be taken to avoid deterioration in the medium-term inflation outlook. Medium term projections assume that the global outlook will remain weak for a long period, but the situation will not worsen further. Nevertheless, uncertainties regarding the global economy continue to be of significant concern. Especially, mounting problems regarding the sovereign debt of euro area economies continue to pose downside risks on the global economy. Concerns regarding the debt sustainability of euro area economies have further increased since the publication of the July Inflation Report, exacerbated by the concerns of a possible contagion to the region’s banking sector.

Despite the role of seasonal factors, this slowdown is more apparent compared to that of recent years (Chart 3). Accordingly, the exchange-rate-adjusted annual credit growth rate is expected to converge at around 25 percent by year-end, as envisaged. In the baseline scenario presented in the July Inflation Report, global economic activity was assumed to continue to improve gradually; however, it was also highlighted that downside risks on the global economy were growing stronger. Indeed, right after the publication of the Report, risk perceptions deteriorated rapidly and debt problems in the euro area further intensified changing the baseline scenario. In response, we introduced a comprehensive package of measures to contain the potential adverse effects of these developments on financial stability and economic activity. The objective of these measures was to supply liquidity to markets in a timely, controlled and effective manner in the event of financial turmoil that may be driven by developments in the global economy. Moreover, we opted for a modest cut in the policy rate in order to contain the risk of recession in domestic economic activity that may be posed by escalating global economic problems. Moreover, Turkish lira required reserve ratios were adjusted in order to extend the maturities of liabilities of the banking system (Chart 6). The mounting uncertainties facing the global economy since the July Inflation Report and accelerating capital outflows from emerging economies called for a series of measures intended to contain fluctuations in the foreign exchange market.