samchain/econo-pairs-v1 huggingface dataset:
One tentative indication that high capacity may be playing an important role is that unsecured rates appear to have settled in about the same position relative to IOR as before liftoff, even though one might have expected the widening in the IORON RRP spread and the lower support from the ZLB to result in some downward shift. The ON RRP also has a per-counterparty cap, which was, and is, $ billion. It seems that the current level of the per-counterparty cap was also adequately large for perceived individual “headroom,” thereby supporting lender bargaining power. Figure 14 shows summary data on how frequently we receive large bids in our operations at the ON RRP and term RRP facilities. As you can see, we rarely see bids of more than $ billion, and combined individual counterparty usage across overnight and term operations has never exceeded $ billion. Recently, we learned a bit about the term RRP operations. We have been conducting these over quarter-ends as a way of providing additional RRP capacity. Additional capacity is available because term RRP operations are subject to a separate overall size limit, and because there is no per-counterparty cap in those operations. Counterparties appear to regard these as close substitutes for ON RRPs, and as shown in Figure 15, we’ve typically seen that overall RRP take-up, across overnight and term RRP, has been fairly stable across quarterends. At this past year-end, there was essentially no take-up at the term RRP operations.

This way, expectations for the FOMC’s future policy stance will be properly incorporated into the term structure of interest rates, and thereby appropriately affect broad financial conditions and the broader economy. It’s not necessary that the effective rate stay within the target range each and every day. Before the crisis, there was usually a bit of variability in the effective rate owing to limitations on the Desk’s ability to achieve completely precise daily forecasts for reserve demand. Now, as I said earlier, the FOMC sets the target as a range, not as a point value. The federal funds rate can vary within that range, and it could even move outside that range on occasion, without materially affecting the economy.25 We have instituted a data-driven, cross-market framework for evaluating interest rate control. In unsecured markets, we gather daily, transaction-level data through a new Federal Reserve statistical collection called the FR 2420. These rich data give us much greater insight than we had before the crisis about how these markets are structured, which is important to developing and maintaining an operating regime based on improving competition among borrowers in money markets, in the context of a large amount of reserves and substantial ongoing regulatory and business model changes. Monetary control does not stop at the effective federal funds rate: The Federal Reserve also wants to ensure that the stance of monetary policy is passed through into other money market rates.
Indeed, a price-level target may be an effective way of implementing the fully optimal monetary policy  BIS Review 111/2010  13  under commitment (Vestin, 2006). A considerable body of research expands on this idea; see e.g. Ambler (2009) and the references therein. Why might price-level targeting generate less variability of inflation and output than an inflation target, as it is tempting to think the opposite should be the case? Under price-level targeting, an adverse shock to demand, which pushes the price level below its target path, necessarily requires higher inflation in the future in order to return the price level to its target path. Assuming that private agents understand this, expected real interest rates fall, so boosting demand today. Inflation expectations therefore act as a more effective automatic stabilizer than they do under inflation targeting. By the same token, an adverse supply (markup) shock, which raises the price level above its target path and depresses output today, leads to lower expected future inflation. But, in the standard New Keynesian Phillips curve describing pricing behaviour, inflation is positively related to expected future inflation. Hence the lower expected future inflation acts to offset the impact of the supply shock by moderating the rise in today’s price level. A corollary of inflation expectations becoming an automatic stabiliser under price-level targeting is that it reduces the extent to which the nominal policy rate needs to fall to offset an adverse demand shock.

These costs are significant, though still modest compared to the output falls during the recession of around 8 per cent in the United States and over 10 per cent in the United Kingdom, relative to a continuation of pre-crisis trends. So this could be an insurance premium worth paying if there was a reasonable chance that it could have prevented these falls. (The regression model obviously does not capture the inherently nonlinear link between the earlier credit/house-price boom and the subsequent near-collapse of the banking system and associated contraction in output; any gain from this more restrictive policy in terms of reducing the likelihood of a future bust is therefore absent – that is why the extent of the downturn in 2008–9 is largely unaffected.) Although the impact on house prices is quantitatively significant, the limited impact on credit – arguably the more important variable in determining the vulnerability of the system – as well as the plethora of other factors at work in creating the crisis, makes us reluctant to conclude that it would have had a major impact on the probability of a crisis materialising. But ultimately this is very much in the eye of the beholder, as we cannot be sure what would have happened under the alternative policy. There may nevertheless be times when a well-judged monetary policy intervention is particularly effective in curbing financial excesses.
And along with income-sustaining measures (such as the minimum living income), they will help reduce inequality in Spain. Inequality levels, which were higher at the onset of this crisis than at the start of the previous one, will probably rise further in the coming quarters, given that this crisis is affecting groups with relatively low incomes to a greater extent. Nor can we forget the need to address ongoing population ageing which, among other aspects, will most appreciably influence the behaviour of the labour market, growth dynamics and the main fiscal magnitudes in the coming decades. It is also a first-order challenge for our pension system. And, of course, the Spanish economy must be nimble and proactive so as to harness the new opportunities that arise from combating climate change and from the transition to a more sustainable economy, from the changes in the globalisation model and from the foreseeable acceleration in the digitalisation of the economy. The prompt design of a medium-term fiscal consolidation programme for gradual implementation once the crisis is behind us After the pandemic, the Spanish economy will post the highest levels of public debt in many decades, partly as a result of the necessary fiscal expansion in the short term. Accordingly, it is also necessary to design a plan to restore health to the public finances in the medium term, the application of which, in any event, will have to be postponed until the recovery is firmly rooted.

“The Credit Rating Crisis”, NBER Working Paper, 15045. Freixas X., Parigi B. and J. Rochet (2000). “Systemic Risk, Inter-Bank Realtions and Liquidity Provision by the Central Bank”, Journal of Money and Credit Banking, 32(2). BIS Review 97/2009  3  Morgan D. (2002). “Rating Banks: Risk and Uncertainty in an opaque Industry”, American Economic Review, 92(4). Rochet J. (2008). “Liquidity Regulation and the Lender of Last Resort”, Financial Stability Review, Banque de France, February. 4  BIS Review 97/2009
And even after the crisis has peaked, banks still face the problem of recapitalization. During these times, the process of intermediation suffers. The existence of a deep and liquid bond market allows financial institutions to prepare themselves better for risk management. The authority can require the banks to maintain a higher liquidity ratio, comprising both government and top-rated corporate bonds. The banks can then resolve their liquidity problem on their own by selling these bonds, regardless of their credit standings, which tend to suffer during a crisis. In Thailand, the lack of a liquid bond market meant that the only way to obtain liquidity under pressure was for the banks to come to the Bank of Thailand using their entire loan portfolio as collateral. And as the crisis deepens, these loans were deteriorating day by day. Another benefit of the bond market is that it can attract foreign investments. Foreigners can bring in funds to invest in high quality papers denominated in Thai baht. They are the ones to absorb foreign exchange risk. Without a bond market, Thai companies have no choice but to borrow abroad and bear the foreign exchange risk, themselves. Experience has shown that they have yet to fully develop their skills in doing so. It is our intention, therefore, to expedite the promotion and development of the domestic bond market. The process is very time-consuming, but they are worthwhile for they provide the foundation for a strong and diversified financial market that would be more resilient to future shocks.

Necessary conditions for bond markets To develop a domestic bond market, we need three essential components:  1  BIS Review 30/2000  First, there must be a deep and liquid government bond market to serve as a benchmark against which corporate papers can be priced. To ensure that the government bond market can continue to provide the benchmark yield curve, the supply of government bonds must be regular, predictable and transparent. In short, the framework of the budgetary process as well as debt management operation must support the continuing supply of bonds through operations such as automatic refinancing or refunding of maturing debt. Tools such as re-opening of benchmark issues, government bond buy-back schemes or repurchase operations are also essential for the efficient functioning of debt management operation. Second, there must be adequate infrastructure, both legal and operational, to support the trade and transfer of instruments and funds. Operational infrastructure includes such things as a delivery versus payment system that is safe, rapid and efficient to ensure finality of fund transfers. An efficient bond registration system is also essential to provide legal protection of ownership of bonds. Rules and regulations to support trading and financing operation such as repurchase agreements, securities lending, short positioning as well as hedging practices are all essential elements. Third, there must be a pool of market participants comprising both intermediaries such as dealers or inter-dealer brokers as well as end-users such as mutual funds, provident and pension funds, insurance.
The operation attracted harsh criticism from various quarters, with arguments that the Government’s intervention to prop up the markets was contrary to the basic principles of a free market economy. Nevertheless, the operation has proven to be a success. During an extraordinary time of market failure, our resolute and extraordinary measures stabilised the Hong Kong dollar and the local stock and futures markets, restored confidence of Hong Kong people and investors, and helped preserve the stability of Hong Kong’s financial system. But this is only half of the story; equally important is success in engineering a smooth exit. Our biggest challenge was to release the huge amount of Hong Kong stocks amassed during the operation to the market with minimal impact on market stability. This was no easy task. In a clear message issued promptly to the market when the operation ended, the HKMA made two pledges. First, the operation was only an extraordinary measure taken at an extraordinary time. The HKMA would arrange to dispose of the stocks as soon as possible. Secondly, the Hong Kong SAR Government would not intervene in the daily operations of the listed companies concerned through its shareholdings. We fully respect and uphold the clear division of labour between the public and private sectors under the market economy. Indeed, I can still remember that following the operation, my colleagues and I worked very hard on explaining at international forums and on other occasions the rationale behind the operation and our intention to start disposing of the stocks quickly.

The Hong Kong SAR Government was facing a “double-play” by the predators – manipulation and profiteering in the money market and stock market through massive short-selling. It was a critical situation – not only were we confronted with a sharp fall in the stock market and great losses to shareholders, there were also systemic risks to our monetary system and financial markets. Classical economics does not differentiate between big and small markets and assumes that market prices will not be manipulated by just a few players. Reality, however, is different from theory. At that time, the market capitalisation of the Hong Kong stock market was only $ billion, a mere 3% of the New York stock exchange’s $ trillion. The predators were unable and hence did not choose to make their move on the big US markets, but were able to plunder Hong Kong’s mid-sized and open market with impunity. 5. However, on 14 August 1998, with the authorisation of the Hong Kong SAR Government and backed by the war chest of the Exchange Fund, the HKMA intervened in the stock and futures markets through market operation to counteract the double-play by international predators. When the market operation was completed by the end of August, the HKMA had used about $ billion to acquire a vast amount of Hong Kong stocks, propelling the HSI from the pre-operation level of 6,700 points to 7,800 points. 6.
If confidence in economic policy deteriorates, for example because Norges Bank sets interest rates so low that inflation and unstable exchange rates are expected, long-term interest rates will rise. The cost of low confidence is thus high risk  5  http://www.statistics.gov.uk/pdfdir/cpi0501.pdf  BIS Review51/2001  5  premiums and unnecessarily high long-term interest rates. Transparency in our intentions, strategies and implementation of monetary policy may contribute to reducing uncertainty among economic agents. If monetary policy is predictable, an important source of risk is diminished. Thus, all else being equal, the interest rate that is necessary to achieve the inflation target will be lower. There will then be a better chance of achieving the inflation target without frequent and abrupt changes in the key rate. Predictability may contribute to ensuring more stable developments in demand and output. Thus, a predictable monetary policy may contribute to improving the efficiency and impact of monetary policy. Predictability and transparency are often equated. However, increased transparency does not necessarily imply a higher degree of predictability. Many cite the Bank of England as a very transparent central bank, because it presents its assessments of the economic outlook in its inflation 6 reports and publishes the minutes of the Monetary Policy Committee meetings.

In a separate press release, the committee explains how the formulations may be interpreted. The Federal Reserve does not publish a traditional inflation report like the Bank of England’s with projections of future developments. However, in connection with the Chairman’s semi-annual testimony to Congress, estimates are given of probable ranges for GDP growth, consumer price inflation and unemployment. The minutes of Committee meetings are published after six weeks, and disclose the way individual members have voted. A complete transcript of proceedings is released after five years. Members express individual views on monetary policy. Norges Bank analyses the inflation outlook in separate inflation reports which are published three times a year. Further assessments regarding the inflation outlook are presented every six weeks in connection with the monetary policy meetings at which the Executive Board sets interest rates. Central aspects of the modelling tools and our view of the functioning of the economy are examined in detail in the Inflation Report and in articles in the journal Penger og Kreditt and its English counterpart Economic Bulletin. The minutes of monetary policy meetings are not published. The Executive Board functions as a unified group in relation to the public. In Canada and New Zealand, responsibility lies with the central bank governor, and therefore only one view is expressed. In the ECB, Australia, Switzerland and Norway, the decision-making body speaks to the public with one voice. Like Norway, Australia includes external members in the body that makes decisions regarding the interest rate.
This would tend to push water uphill – a countervailing capital flow substitution effect; and    Third, a change in the composition of the global market portfolio as emerging economies account for a larger slice of the pie – a capital flow income effect. By combining these three factors, we can form a proximate picture of the emerging pattern of global capital flows. These projections are based on the same restrictive set of modelling assumptions. Nonetheless, they provide a transparent window on possible emerging patterns. Are the forces of financial deepening in emerging capital markets sufficient to outpace the reduction in advanced country portfolio home bias, lessening the BFSP problem? Or does portfolio reallocation by advanced economies risk swamping embryonic emerging capital markets exacerbating this problem? Chart 13 looks at the ratio of annual average capital flows to G20 emerging markets relative to their market capitalisation over the period 2010 to 2050. It is the analogue of Chart 2, using projections of both numerator and denominator. The highest and lowest annual inflows over the projection period are also shown to capture potential annual variation in capital flows. Chart 14 plots annual gross capital inflows to emerging markets over the same period. 5  Non-G20 market cap is assumed to grow in line with the forecast for total G20 market capitalisation.

With the assistance of a specialized international consultation, we believe this shall be a new, contemporary law and it shall identify a number of issues addressed in the form of FSAP recommendations. Starting from July 2005, the automated electronic clearing house system commenced to operate. Currently, we are working on completing the regulatory framework with a view to augmenting the services provided to the economy, aiming primarily at automating utilities’ periodical settlements. In November, the Bank of Albania Supervisory Council amended the Regulation “On licensing nonbank entities”, aiming at involving all non-bank financial institutions which operate in the territory of the Republic of Albania in the Bank of Albania licensing and supervision scheme. In October 2005, the Bank of Albania Supervisory Council approved the new organization structure of the Bank of Albania, placing a major emphasis to enhancing legal counselling, statistical service and public communication. These tree functions are deemed as very significant, in particular when considered in the context of our objectives related to monetary policy and EU integration. BIS Review 88/2005  1  Another short-term FSAP recommendation related to improving Bank of Albania transparency is now accomplished. Every interested person could be informed on the rules that the Bank of Albania pursues when it intervenes in the foreign currency market or be acquainted with the present agreements between the Bank of Albania and the Ministry of Finance. We have been intensifying our efforts to reaching to a rapid and effective solution as regards the Credit Information Bureau.
Thus the modern central bank is really akin to keeping peace in the nation through enhancing stability and it’s other people’s jobs to create wealth or turmoil as the case may be, the turmoil being a necessary instrument in coming to the right policies or at time the wrong ones or in an ever worse ending turmoil without apparent purpose as is so often the case in emerging markets. But it certainly is not now deemed the function of the central bank to be doing this sort of thing. So central bankers can now claim that they are basically trying to create peace and hopefully in a peaceful economy, there will be better prosperity than a wildly gyrating one. In a peaceful economy, growing stably at a high but sustainable rate, one cannot expect that there will be no criminals hidden deep down somewhere inside the society. A new instrument has therefore been added to the arsenal of monetary policy and financial supervision in the anti-money laundering legislations. The first anti-money laundering legislation was issued in 1970 by the US government. The mechanism is generally that cash deposit of more than the minimum stipulated amount would be examined. In the case of Thailand, this legislation was issued in April and became effective in August 1999. The central bank participated fully in the draft and cooperates with its implementation.

With new knowledge and new solutions, the sea will continue to be a force that carries us forward. Chart: The new banknotes More than a thousand years ago, the Vikings brought home the idea that Norway should have its own monetary system. Olav Tryggvason was to be the first Norwegian king to have his name stamped on Norwegian coins. Our methods of payment have changed since then – from coins via banknotes and plastic cards to online and mobile payments. But banknotes and coins will stay with us. Norges Bank’s responsibility is to ensure that they are safe to use – based on the most advanced modern technology. And they should be beautiful – as beautiful as the sea that surrounds us. Thank you for your attention. 4/4  BIS central bankers' speeches