samchain/econo-pairs-v1 huggingface dataset:
This seems to respond to an attempt to rebuild inventory levels after the reduction of late 2011 and that, at the time, was linked to the expected negative effects of the external scenario on final sales. Also worth noting was the renewed strength of consumption and gross fixed capital formation. Consumption continues to rely on the evolution of the labor market and fairly stable financial conditions. Regarding investment, the contribution of construction and infrastructure works stands out, relating mainly to mining and energy projects, but also to a strengthened real-estate sector, which reflects on the performance of commercial loans. The behavior of output, especially of sectors other than natural resources, and domestic demand intensified the utilization of installed capacity. Although y-o-y growth in employment and nominal wages has dropped, the labor market remains tight (figure iv). However, the increased domestic demand pressure, especially from investment, together with lower copper prices compared with 2011, have led to a widening of the current account deficit. In the moving year ending the second quarter of 2012 this deficit rose to 2.7% of GDP, from 1.3% at the close of 2011. In the past few months, y-o-y inflation has continued on a downward path, influenced by fuel prices. Core inflation, which excludes foodstuffs and energy (CPIEFE) has stabilized near 2.5%. The difference between core inflation for goods and core inflation for services has prevailed. The latter, more closely related to the state of output gaps, has hovered around 5%, a reflection of existing medium-term risks on inflation.

Importantly, SOFR proved to be resilient even during the market stress at the height of the pandemic last spring and will provide a rock-solid foundation for the post-LIBOR world.3 The final comment I’ll add on this topic is that while much progress has been made in the transition away from LIBOR, time is running out, and your transition from LIBOR should happen as soon as practically possible. This is not something to leave until the last minute. Economic Outlook OK, enough on LIBOR, at least for today. I’ll now turn to the theme of the economic outlook and where I see us on the path to a full recovery. Let me begin by saying that we’ve come a long way since the darkest days of the pandemic, and I expect even brighter days ahead—and I don’t just mean that because it is finally summertime. 1/3  BIS central bankers' speeches  We find ourselves at an extraordinary juncture in the recovery. Thanks to widespread vaccinations and robust support from fiscal policy, the economy is reopening more quickly and more strongly than expected. When it comes to the economy, it’s getting better all the time. The rapid rebound is excellent news—it means more jobs and a brighter future. But, it also means that we are seeing strains as businesses try to keep up with the rapid acceleration in demand for their products. After sharp declines in employment, production, and prices last year, the opposite is now occurring.
1 Gerard Dages, Jonathan McCarthy, and Paolo Pesenti assisted in preparing these remarks. 2 Specifically, the Earned Income Tax Credit and the Additional Child Tax Credit. 3 See, for example, Lawrence Summers, U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero  Lower Bound. 4 See, for example, some estimates based on the frequently-cited Laubach and Williams model. See Thomas  Laubach and John C. Williams (2003), “Measuring the Natural Rate of Interest,” Review of Economics and Statistics, v. 85, iss. 4, pp. 1063–70; Thomas Laubach and John C. Williams (2016), “Measuring the Natural 6/7  BIS central bankers' speeches  Rate of Interest Redux,” Business Economics, v. 51, iss. 2, pp. 57–67; and Kathryn Holston, Thomas Laubach and John C. Williams (2017), “Measuring the Natural Rate of Interest: International Trends and Determinants,” Journal of International Economics, Supplement 1, v. 108, pp. S59–75. 5 See Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under  their individual assessments of projected appropriate monetary policy, March 2018. 6 See Congressional Budget Office (2018), The Budget and Economic Outlook: 2018 to 2028, April 9, 2018. 7 See also William C. Dudley, The Outlook for the U.S. Economy and Beyond, January 11, 2018. 8 For a further discussion, see William C. Dudley, Making Globalization Work, March 1, 2018. 9 The costs of holding cash make possible the use of (slightly) negative interest rates—employed by some  countries outside the U.S. in recent years—as a result, the term “effective lower bound” is used here.

These include: 1) Determining the appropriate long-term implementation framework for U.S. monetary policy, and 2) deciding whether the strategic framework underlying monetary policy decisions needs to be adjusted to mitigate the risks associated with getting pinned at the effective lower bound for short-term interest rates.9 For the first issue, I see two options: return to the “corridor”-type system that was in place prior to the financial crisis, or remain with the framework that has been in place since the crisis— namely, a “floor” system. In a corridor system, reserves in the banking system are scarce, and the federal funds rate is set by adjusting the supply of reserves through open market operations to balance demand and supply at the FOMC’s target range. In contrast, in a floor system, reserves are abundant, so that the interest rate the Federal Reserve pays on excess reserves, or IOER, is the primary tool used to control the federal funds rate. In my view, the case for retaining the current floor system is very compelling for a number of reasons. First, it is operationally much less complex than a corridor system.
And if they materialised to any very significant extent, the resulting tensions could be serious, because alternative mechanisms - such as labour migration or fiscal redistribution through a central budget - which help to mitigate sectoral or regional disparities in the national context - are less developed at the Eurozone level. Some commentators point to the present inflationary pressures in Ireland as an example of the problems that could arise where the single monetary policy is easier than the national situation might require - though I am not sure how far one can sensibly generalise from the Irish experience. It is equally possible to envisage circumstances in which the single monetary policy is too restrictive for some countries. The fact that the UK did not join in the first wave of EMU was a disappointment to some people, including to some of our European partners - but it was also a considerable relief to them - we would certainly have complicated the task of the ECB in setting its single monetary policy. And from our own perspective, if we had joined EMU from the start - and had Eurozone interest rates over the past eighteen months or so, it is very difficult to envisage how we would have avoided an inflationary boom in the UK. It is true that, to the extent that the present imbalance within our economy reflects sterling’s appreciation against the euro, we would have been protected against that.

The price of five-year futures contracts for West Texas Intermediate crude has almost doubled in the last three years. Following the sudden rise last spring, US capital market rates have since dropped back to the year-earlier level. The temporary increase in capital market rates in Europe was slightly less pronounced. As a result of the opposing movements of the US and European interest rates of the past few weeks, the long-term dollar interest rates now exceed the corresponding interest rates in the euro area by approximately 50 basis points. On the one hand, the general interest rate development in the capital markets reflects market participants’ misgivings concerning the strength of the economic upswing. On the other hand, the historically low nominal interest rates are testimony to the markets’ confidence in the ability and determination of central banks to further ensure price stability. Moreover, the interest rate structure in the US is characterised by the sizeable dollar investments from Asia. International equity markets trended sideways for much of the year, although some emerging market indices in particular were able to generate significant profits. 2. Managing the National Bank’s assets  The National Bank manages monetary reserves slightly in excess of CHF 60 billion, two-thirds of which are held in foreign currency investments and one-third in gold. In addition to this are approximately 25-30 billion Swiss franc assets in the form of balances from repo transactions in the  1/2  money market and bond investments in the domestic capital market.
Using the rankings of each correlation in the pooled sample, a normally distributed test statistic is constructed, under the null that the two samples are drawn from the same distribution. 23  Jennrich’s test for the equality of two correlation matrices derives a chi-squared distributed test statistic from transformations of the correlation matrices, including a term correcting for the bounded support ([-1,1]) of the difference between two correlations. The null is equality of the matrices. 18  BIS Review 168/2010  Chart 14 Dispersion of equity returns of major UK banks and top UK 100 PNFCs (by market cap)  Source: CapitalIQ and Bank calculations. Chart 15 Dispersion of ROE of top 10 UK banks and top 10 UK PNFCs (by market cap)  Source: CapitalIQ and Bank calculations. BIS Review 168/2010  19  Chart 16 Cumulative distribution function of cross-country correlations of credit cycles  Source: Bank calculations  Chart 17 Cumulative distribution function of cross-country correlations between medium term GDP cycles  Source: Bank calculations. 20  BIS Review 168/2010  5. Curbing the credit cycle  Taking together the evidence from Sections 2–4, what are the implications for public policy? First, according to the model a credit cycle arises from a collective action failure among banks. The lending decisions banks take, while individually rational, are collectively suboptimal. Specifically, individual banks may fail to internalise the reputational externalities their lending actions impose on others.

These factors combined have resulted in a large increase in the different measures of inflation, bringing CPI and CPIX1 (a measure of core inflation that excludes perishable foods, energy and regulated tariffs) annual change close to 4%. By contrast, labor cost pressures and other inflation trend indicators are nearer to 3%. Similar problems (i.e., increased inflation due to sudden rises in food prices) have been recently suffered in such diverse countries as South Africa, Brazil, Colombia and China. It is interesting to note that a price measure that excludes foods and energy prices, similar to the CPI core inflation calculation applied by the US, shows annual change below 2% in July (Figure 2). 2  BIS Review 97/2007  Figure 2: CPI, CPIX1 and CPI inflation excluding food and energy (annual change, percent)  Note: In brackets participation in total CPI basket. Sources: Central Bank of Chile and National Statistics Bureau. This phenomenon is not new. Given the supply-side or specific price shocks, the 2000s have seen annual inflation drop below 2% and climb above 4% during temporary episodes. In this picture of higher CPI inflation due to various supply shocks, short-term inflation expectations have increased substantially, but remain close to 3% for medium and long term. Because monetary policy affects inflation with lags that are largely unknown, but long – usually more than a year – not much can be done to reverse a short-term inflation jump.
This type of monetary policy is known as leaning against the wind, and in this case the wind would be growth in household debt. Household indebtedness has affected the monetary policy assessment in Sweden in earlier periods, too, but it is primarily since autumn 2012 that it has explicitly been cited as a reason for a higher repo rate than is strictly justified by the prospects for inflation and resource utilisation.1 Although other central banks have also referred to high indebtedness and mentioned financial stability risks in connection with monetary policy decisions, few central banks have faced such a clear conflict of objectives as the Riksbank. What this entails is either to keep the repo rate higher to slow down the build-up of debt, or to keep it lower to bring up an inflation that has long been below target at the same time as resource utilisation has been low. Personally, I have been sceptical of the policy conducted, which has meant that I entered reservations against the decisions over a long period of time. Now that inflation has recently moved even further away from the target, the Executive Board has been able to agree on the monetary policy decisions. The repo rate was cut most recently in December last year and the repo-rate path was lowered. Why inflation has been so low is something of an open question. I believe that the policy conducted has been an important contributory factor. At the same time, I believe that its effects on household indebtedness have been minor.

As a result, although necessary and desirable, the digital transformation of financial intermediaries carries a significant execution risk. This is the first type of risk to which we are exposed, and one that is highly idiosyncratic, but we need to recognise it. Next, digitalisation is challenging existing business models and their profitability, which can have destabilising effects in a banking industry such as Europe’s where there are overcapacity issues and where profitability is rising but remains well below US levels. The third type of risk is that digitalisation gives operational risk a more systemic footprint. In a 2/7  BIS central bankers' speeches  largely dematerialised world where financial services can be accessed via multiple channels, cyber-risk poses an increasingly significant threat. Similarly, the use by financial intermediaries and their operational reliance on a small handful of providers of “suites” of technological solutions, and not just softwares, raises the risk that a service disruption might impact the entire system and not just a single entity. b. What are the priorities for microprudential supervisors? In light of these complex and interconnected risks, and the fact that a significant portion of them are new, financial intermediaries and supervisors need to exercise vigilance in order to understand the exact nature and impacts of the threats, and take appropriate steps to contain and manage them.
Productivity growth (GDP per hour worked) 1981-2003, per cent 4  4  Productivity growth 3  Long-term development  3  2  2  1  1  0  0  -1  81-90: 1.2%  91-94: 2.1%  95-00: 2.4%  01-03: 2.2%  -1  1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003  Sources: Statistics Sweden and the Riksbank  Figure 3. Change in number of hours worked 1981-2003, per cent 3  3  Change in hours worked Long-term development  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 -4  -4 -5  81-90: 1.0%  91-94: -2.1%  95-00: 0.9%  01-03: -0.7%  -5  1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003  Sources: Statistics Sweden and the Riksbank  BIS Review 64/2004  9  Figure 4. Population growth and change in age group 20-64 years in the population 1981-2020 (forecast 2004-2020), per cent 1.0  1.0  0.5  0.5  0.0  0.0  Population growth Growth in age group 20-64 years 2019  2017  2015  2013  2011  2009  2007  2005  2003  2001  1999  1997  1995  1993  1991  1989  1987  1985  1983  -0.5 1981  -0.5  Source: Statistics Sweden  Figure 5.

Other factors could also have an impact during the course of 2008, for instance, via a decline in the total wage bill paid by the sector. Against this backdrop, Swiss GDP growth is likely to settle at around 2% in 2008. This easing-off should allow for a reduction in the level of capacity utilisation. In a moment I will outline the risks attached to our baseline scenario. BIS Review 150/2007  1  Developments in monetary and financial conditions Since the onset of the sub-prime credit crisis in August, yields on long-term Swiss Confederation bonds have remained almost unchanged. For 10-year maturities, the rate has fluctuated around 3%. For shorter maturity bonds, however, the search for quality investments has resulted in a drop in rates. Yields on two-year maturities, for instance, have fallen from 3.0% to 2.0%. However, this decline has been partly offset or even fully neutralised by an increase in risk premiums, in particular in the case of issuers with poor ratings. Since September, the depreciation in the US dollar has accelerated. The Swiss franc has also strengthened a little against the euro, although the movements were more volatile in nature. Monetary and financial conditions can also be analysed in terms of volumes. Special attention should be given to commercial lending, since a shortage of credit in the current circumstances would be equivalent to a tightening in monetary conditions. However, no effect of this kind can be identified in Switzerland, not even in the most recent statistics.
Discussion as to the institutional arrangements that are most appropriate from the point of view of financial stability remains open. One key question is who should be responsible for the tasks of prudential regulation. Another, although perhaps slightly less important, is who should do the supervision. There are arguments in favor of different policy options, but any specific recommendation must take into account the experience and circumstances of each country. Until the crisis, the prevailing trend was for a body different from the central bank to be responsible for regulation and supervision whereas now the wind seems to be blowing in the opposite direction. In this context, one piece of practical advice is not to significantly change something that has worked well. In any case, the decisions that are taken may have significant implications for central banks’ institutional insertion, the scrutiny to which they are subject, and internal organization of their activities. These implications become particularly important if it is decided to give the central bank broad responsibility for financial stability. In this case, it may be advisable to adjust internal governance so as to ensure the necessary separation of the objectives of financial stability and price stability. Under any institutional model, coordination and communication between the different authorities with functions related to financial stability will always be very necessary.

Many of these instruments, such as providing liquidity, are inherent or traditional while others, such as regulating and watching over payment systems, have developed in recent decades. The experience of the last few years has suggested a need to review or update the available instruments and to generate the operational conditions in which they can be used without delay when needed. During this latest crisis, for example, many central banks were not operationally prepared to receive collateral that was not in habitual use. It has also been suggested that there is a need to incorporate new instruments, principally with a macroprudential approach. However, in the case of some of these instruments – specifically, the use of regulation for countercyclical purposes – evidence is scarce and debate as yet inconclusive. However, beyond the contribution that a central bank can make, financial stability requires a comprehensive framework of financial institutions, policies and practices. The solidity of this framework and its consistency are crucial. Regulation and supervision, whether or not in the hands of the central bank, are critical, but so too are monetary and fiscal policy. The recent sovereign debt crisis in Europe, for example, has demonstrated the importance of fiscal conditions for financial stability. Market discipline and institutions’ management, although discredited by the crisis, are factors that can, with an appropriate regulatory framework and incentives, contribute to stability. The efficiency of regulation and supervision should, in the end, be reflected in good behavior by institutions and the proper functioning of markets.
The financial stability analyses focus on macroeconomic stability factors and on the strength and soundness of the financial system as a whole. The Bank addresses both these principal areas with a strong professional ambition. Its two main fields of analysis reinforce each other and benefit from close cooperation among the staff. Both areas have forced us to put our analyses, projections and policies on a longer-term perspective which provides an opportunity for better overall economic and monetary policy management. Although much remains to be explained about the nature of the interaction of monetary and financial stability, I mentioned earlier that a sound financial system is a precondition for economic and monetary stability and the implementation of an effective monetary policy. In this respect, these areas support each other. Since financial liberalisation was introduced, we have not faced circumstances where financial stability concerns have directly affected or conflicted with monetary policy decisions. Our aim is to prevent such a situation from arising. The potential risks to financial stability at the end of the last upswing were defused by the swift achievement of monetary stability and the restoration of internal and external balance. In conclusion, I would like to repeat my warm welcome to all the participants in the seminar. I trust that both the seminar and your stay in Iceland will be interesting and rewarding, professionally and socially. BIS Review 34/2004  3

Eva Srejber: Are we ready to deal with a cross-border banking crisis in Europe? Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at the seminar on Financial Institutions’ Value Management in the Integrated Market in Light of the Lisbon Strategy, Gdansk, 12 May 2006. *  *  *  Introduction Thank you very much for inviting me to Gdansk and this seminar on Financial Institutions’ Value Management in the Integrated Market in Light of the Lisbon Strategy. The financial system plays a crucial role in the economy. It provides households and companies with a number of important tools as well as the infrastructure for channelling savings into funding of productive projects, managing and allocating various kinds of risk, and facilitating efficient transfer of payments. The more efficiently the financial system works, the better the rest of the economy will work. One could say that the financial system is the oil that makes the machinery run more smoothly. The European financial markets have long been very fragmented. As Europe’s economies have become more integrated, however, the drawbacks of this financial market fragmentation have become increasingly evident. A more integrated market for financial services could, for instance, lead to enhanced cross-border competition and better opportunities to make use of economies of scale and synergies. Greater competition in turn should result in a wider range of investment and financing services and more efficient pricing of these services.