samchain/econo-pairs-v1 huggingface dataset:
In other words, asset values should be neither a target nor a goal of monetary policy. The rate of increase in asset values alone seems to tell us very little about underlying and future inflation. Because we know so little about how to assess the appropriateness of asset values against fundamentals, because we have so little capacity to both forecast and predictably affect the future path of asset prices, and because we know relatively little about how changes in wealth affect the real economy and inflation, we cannot use monetary policy responsibly or effectively to achieve specific objectives for asset values. Monetary policy does not today and is unlikely in the future to offer us an effective tool for directly reducing the incidence of large or sustained deviations of asset values from what might turn out to be their fundamental values, what some call bubbles. That said, monetary policy still has to take into account the impact of significant movements in asset values on output and inflation. Financial asset prices, by their nature, allocate resources between the present and the future and thereby affect consumption, investment and future growth. History provides us with numerous examples in which significant movements in asset prices have had sizable effects on the path of output relative to potential and on price stability. And experience suggests that asset values can be very sensitive to movements in monetary policy or to the perceptions of future policy moves.

If it turns out that the anticipated fall in asset prices does not materialize, the policy constructed under the assumption of a decline will likely have been too easy, and that might itself contribute to further rises in asset prices. This might sound like a more or less generic statement about the perils of having to make policy based on forecasts, but there is a sense in which the forecasting of asset prices, or indeed even understanding the driving forces behind movements in asset price after they have occurred, is particularly challenging. This is why there is a vast literature focusing on these challenges and characterizing the many "puzzles" of the behavior of asset prices. More generally, despite the fact that policymakers can’t be completely confident in their assessment of the future path of asset prices, it seems unavoidable that these assessments will factor into policy decisions. This is not to say that central banks should lean against bubbles or against asset price movements themselves. Nor should the appropriate response to a given change in asset prices be to change policy by more than what would be appropriate to address the effects on the central objectives of the central bank. But policy, in some circumstances, will need to respond to asset price movements when those movements alter the central bank’s assessment of the risks to its outlook, and that change in the assessment of the risks to the forecast should be part of the central bank’s communication with the public.
In Europe, market incentives seem sufficiently strong to favour use of CCPs, and we would not see a need at the current juncture to advocate regulatory action to impose central clearing of repos, as has been the case for OTC derivative transactions. At the same time, an expanded use of CCPs should be accompanied by effective supervision and oversight, which always needs to be kept up to date and in line with new market developments. The global Principles for Financial Market Infrastructures (PFMIs), developed jointly by CPSS and the International Organisation of Securities Commissions (IOSCO) and published last April, are a key pillar in this regard. Major jurisdictions around the world are now updating their supervisory and oversight requirements for CCPs in response to the new PFMIs, thereby leading to an even more robust set-up for CCPs. Another major strand of work currently underway at both international and EU level concerns the development of recovery and resolution regimes for CCPs. In the EU, the European Commission has recently consulted the public on a possible framework for the recovery and resolution of financial institutions other than banks, covering CCPs and other market infrastructures. We trust that the European framework will be closely aligned with the respective global work of the CPSS and IOSCO. Besides CCPs, another key infrastructure to be considered in relation to the repo market is the trade repository.

Mr Gjedrem focuses on monetary policy challenges in Norway Article by Mr. Gjedrem, Governor of Norges Bank, the Norwegian central bank, published in the Norwegian daily Aftenposten on 3 May 1999. In Norway, fiscal policy has a prominent role in stabilising growth in production and employment. The Government Petroleum Fund shall serve as a buffer so that fluctuations in the government’s oil revenues do not influence the mainland economy, but only have an effect on capital exports. The local and centralised income settlements determine wage growth. Monetary policy instruments are oriented with a view to maintaining a stable krone exchange rate against European currencies. If the government budget stabilises the domestic economy, wage growth is kept on a par with the level in Europe, and fluctuations in oil revenues are absorbed by the Petroleum Fund, Norges Bank stands a good chance of ensuring exchange rate stability through monetary policy. However, this has not been the case since 1996. The government budget has not made a sufficient contribution to smoothing growth in domestic demand and production, wage growth has been substantially higher than in other countries, and oil revenues have fluctuated widely. Furthermore, it seems that the krone is easily exposed to the contagion effects of turbulence in international markets. The krone exchange rate has fluctuated in spite of Norges Bank’s active use of instruments. Developments in recent years indicate that Norges Bank cannot fine-tune movements in the krone exchange rate.
This was in connection with a discussion on the general increase in prices that was expected to happen in the United States: Even those who tend to agree with the concept of a rough balance between supply and demand (i.e. no inflationary or deflationary gap), point out that there is still a huge money supply— and that is the hard core of inflation…. In time, this concept began to be used increasingly often, especially when inflation began to rise at a rapid pace in the beginning of the 1970s (see Figure 1). 4 According to Gordon (1975a), the higher rate of inflation was due to a number of factors: That food prices had begun to increase faster as a result of supply factors in the United States and abroad, that the oil price had risen as a result of production restrictions introduced by the OPEC oil cartel, that the Nixon administration had introduced price and wage freezes and the devaluation of the dollar in 1971 and 1973. Now a need arose to distinguish temporary price increases from more lasting ones. 3 See, for instance, Rogers (1998) for a discussion of how central banks use the concept. The next reference in the same text search of Wynne is Sprinkler (1975). He writes: “Recent price increases of 10-12 percent annually were about double the hard-core inflation”. 4  3 [19]  Figure 1. CPI inflation in the USA Annual percentage change.

16 When inflation has a rising trend, the underlying inflation measure should increase at the same pace.17 On the other hand, the underlying measure should vary less than the target variable. The measure of underlying inflation should say something about the future actual inflation rate. The measure should be forward-looking, that is, say something about future inflation. If the underlying measure covaries with the trend in actual inflation, this should give some guidance regarding future developments. Let us imagine a situation where the underlying measure of inflation is higher than the actual rate of inflation. If it is a good measure of underlying inflation, it should then show the actual inflation rate rising somewhat further ahead. The measure of underlying inflation should covary with factors that are important to the development of the actual inflation rate. It is also desirable that the measure covaries with macroeconomic factors that are important to the development of actual inflation, such as the general demand situation in the economy. The better the measure succeeds in adjusting for white noise, the better it should covary with various explanatory factors. The measure of underlying inflation should be easy to understand. The underlying measure should be available soon after new data on actual inflation has been published. It should also be easy to understand how the indicators have been calculated. 16  The underlying measure should thus be persistent. 17 This type of trend is calculated in Clark (2001) with the aid of a centred moving average over 36 months.
A few days ago, on 7 February, we celebrated the thirtieth birthday of the European Union and of the Maastricht Treaty. I was personally present during the signature of this Treaty, which promoted “the strengthening of economic and monetary union, ultimately including a single currency”. We have successfully established a monetary Eurosystem, however a real financial Eurosystem must now develop. Let me therefore share some proposals on the Banking Union and the Capital Markets Union (CMU), which are the two cornerstones for such a financial Eurosystem. We are all aware the Banking Union is for 19 countries, and tomorrow 21, while the CMU is for 27. But allow me to mix them today with a common core – the euro area – and a common purpose – the right funding of our economies. I will quote two thriller books today. You may rightly think of The postman always rings twice: Andrea Enria and myself already conveyed this message quite plainly regarding the Banking Union during the last Eurofi session in September. You may also think that these projects are more or less stuck. It is true that there has been deadlock and I will list the bad reasons for this. But there are also good reasons why we can break this deadlock now and give the projects of Banking Union and CMU new momentum (I). I will then describe the new possible steps for the Banking Union (II) and the CMU (III). I.

We must channel it towards productive investments and innovative projects. In view of these high stakes, the Eurosystem warmly welcomed the launch of a new CMU action plan by the Commission in September 2020. Its sixteen legislative and non-legislative initiatives will help turn Europe into a genuine single financing market. The main issue now is to ensure the concrete implementation of the CMU. We still need to better prioritise our actions ex ante, and monitor them ex post. The CMU will not be implemented overnight and remains a long-term project. Developing a monitoring framework with selected priorities and indicators is therefore 3/4  BIS central bankers' speeches  warranted, especially as the CMU enters an important legislative phase in 2022. As part of the CMU, we have another major financial stability issue to tackle over the next few years: European banks’ overreliance on third-country CCPs for the clearing of financial derivatives. Around 80% of interest rate swaps denominated in euro are still cleared in the UK; this situation cannot continue forever. For fear of market disruption, the Commission recently decided to extend equivalence for UK CCPs until end June 2025. However, Commissioner Mairead McGuinness made it crystal-clear that this extension was the last one, and that the three next years were to be used specifically for a rebalancing of clearing to the EU. I could not agree more.
In advanced economies, the difference lies in the fact that domestic wealth is more relevant in relation to GDP and is partly composed of domestic debt instruments, including government bonds. A debt restructuring or default thus has an immediate and direct impact on the value of the residents’ wealth and thus on the real economy. The larger the impact of a (partial) default on the financial and real economy of the country, the more costly a (partial) default would be, compared with the alternative of achieving the primary surplus necessary to stabilise and reduce the public debt. What is often forgotten is that the wealth effect does not depend only on the direct effects of a default or restructuring of the public debt, but also on the chain of events that would be triggered throughout the entire banking and financial system. Owing to the role of advanced economies as lenders of last resort to their own financial system, as has been confirmed by this crisis, a debt problem at the level of the state would cripple the economy as a whole. This is often ignored by those who claim that there can be such a thing as an “orderly” debt restructuring mechanism for the public debt of advanced economies. We need better analysis also in this domain. The second issue which deserves more analytical work relates to the functioning of global financial markets in allocating resources and setting relative prices in an environment in which the probability of sovereign default becomes significant and widespread.

At the latest Economic Policy Symposium held in Jackson Hole a couple of weeks ago, in a very stimulating paper, Eric Leeper set out a long list of questions that he felt should be addressed by researchers in order to fill the large knowledge gap in the field of fiscal policy and guide it closer to scientific analysis and away from its current state of alchemy. 1 Tonight I would like to add a couple of issues to that list, which are partly related to the international dimension of fiscal policy (often ignored by US academics). I will try to inspire our academic colleagues to give more thought to some issues which are key to the functioning of the global financial system and about which policy-makers often do not have sufficient understanding to inform their actions. The legacy of the financial crisis One feature of the financial crisis that has become apparent only at a relatively late stage has been the dramatic and widespread increase in public debt, especially in advanced economies. I will focus on this legacy and its implications for both the global financial system and the global economy as a whole. First, regarding the global financial system, high levels of public debt in major advanced economies are likely to have a non-negligible impact on financial market conditions over the next few years. We have seen in some cases how financial markets react to delayed fiscal consolidation, at times in a rather non-linear fashion.
See for Example ‘Central bank digital currencies: foundational principles and core features series of reports  . ’ (2020) and the  on digital currency aspects (e.g. financial stability, system design) published in 2021. 17. These are likely to involve testing individual components of the digital pound architecture (against standards built on the considerations set out in our Technology Working Paper). Project Rosalind , being run out of the London Centre of the BIS Innovation Hub is one example of the kind of work we envisage. That project is currently running a tech sprint and expressions of interest are open until 10 February.

The new series of targeted refinancing operations (dubbed “TLTRO 2”) should improve medium-term funding conditions for banks and foster bank lending to companies and households. 1  INSEE: Indicateur de climat des affaires et de retournement conjoncturel. BIS central bankers’ speeches  1  3/ Structural policies Moreover, monetary policy is not the only game in town. It is supported by structural reforms that increase potential growth, particularly in countries with a high unemployment rate. History has shown that ambitious reforms can contribute durably to growth. Sweden in the 1990s and Germany a decade later have demonstrated that structural reforms enhance employment rates, potential growth and resilience. They also reduce labour market duality, and provide more opportunities to new entrants in the labour market, particularly young people. In the wake of a severe crisis, Sweden and Germany rebuilt their economic models and, as a result, have been better able to weather the latest downturn. Indeed, a number of European countries are conducting major reforms to bring high and sustainable growth back. Those reforms are particularly challenging when it comes to the labour market, but they are needed. We need to improve labour flexibility and reduce the duality in the labour market between permanent and temporary contracts, which generates both high structural unemployment and inequality. The most emblematic example is Spanish reforms. Their results are impressive, especially when we consider the very difficult economic situation in the country during their implementation.
This is based on the observable facts that arrears and defaults tend to emerge in downturns and that loans written at the top of the cycle tend to have higher losses. Banks are required therefore to set aside a general provision against likely future loss each time they write a loan on the basis of a formula which is sensitive to the cycle. This is an accounting provision so these provisions are deducted from profits when they are made, and reduce dividends and profit related bonuses. They are then drawn down automatically as losses appear. In effect this requires banks to build up reserves in the upswing of a cycle which can cushion their losses in the downswing. The system has not prevented a property boom and bust in Spain but it has put their banks in a much stronger position to survive it by calling on these general provisions which amounted to over 1% of total assets. And in the process of protecting the banks from the cycle, this system has helped to some degree to dampen the cycle itself. Varying capital regulations in this way can act as a brake on the exuberant swings in lending we have seen in recent years. By requiring banks to hoard capital in the upswing, regulators make it more expensive for banks to lend money. And by dampening the credit cycle policy could help stabilise spending in the real economy.

4 Daniel Awrey and David Kershaw, “Toward a More Ethical Culture in Finance: Regulatory and Governance  Strategies,” in Nicholas Morris and David Vines, eds., Capital Failure: Rebuilding Trust in Financial Services, 284 (2014) (“While codes of conduct, ethics, and best practice can be drafted and held up as identifying desirable behaviors, the norms these codes purport to reflect may be overpowered by other countervailing influences.”). 5 Mark Egan, Gregor Matvos, and Amit Seru, “The Market for Financial Advisor Misconduct,” Working Paper 22050,  National Bureau of Economic Research, February 2016. 6 Gillian Tett, The Silo Effect, 45 (2016). 7 Ignazio Angeloni, Ethics in finance: a banking supervisory perspective, Remarks at the Conference on “The New  Financial Regulatory System: Challenges and Consequences for the Financial Sector,” September 26, 2014. 8 David Walker, Trust and Trustworthiness in Banks and Bankers, Remarks at the Federal Reserve Bank of New  York, October 20, 2014. 3/3  BIS central bankers' speeches
At the current juncture, the longer-term risks associated with a massive, uncontrollable expansion of the SNB balance sheet would have been out of proportion to the benefits of continuing to enforce the minimum exchange rate. This does not mean that the SNB will refrain from expanding its balance sheet further, should it prove necessary. Rather, it clarifies that this policy option should be used only when the benefits clearly outweigh the costs. Fiction III: The SNB has unlimited power The drastic actions taken by central banks since the financial crisis – flooding financial markets with liquidity on an unprecedented scale, injecting billions to save banks from failing, or, in the case of Switzerland, intervening heavily in the foreign exchange markets – have led to the widespread perception that central banks have unlimited power. On the one hand, this perception is based on the fact that central banks are entrusted with the note-issuing privilege, i.e. they can “print money”. In view of the current difficult debates about austerity and deleveraging, the tendency to overrate the power associated with this privilege is probably natural. Yet this view overestimates its actual power, for printing money  4  BIS central bankers’ speeches  can only resolve short-term liquidity issues. In the long term, it creates no value and merely generates nominal price increases. On the other hand, the perception that central banks are all-powerful is also based on the fiction that their independence renders them immune to democratic controls.

We want to share the risks and costs with financial institutions in this climate to retain and develop talent. In addition, MAS has also announced that it would set aside $ million to support fresh local university graduates in industry attachments over the next 1-2 years. Closing As an international financial centre, Singapore needs to continually build on its fundamentals. We have to retain and enhance trust and confidence among investors and businesses here by continuing to provide socio-political stability, respected regulatory standards and a wellregarded legal regime. Underpinning all these efforts is a highly skilled and professional talent pool. AXA’s decision to locate its training centre here will therefore go a long way to support this effort. On that note, I would like to extend my heartiest congratulations once again to the AXA Group for the launch of the AXA University Asia-Pacific Campus in Singapore. I wish you every success in this very important endeavour. Have a great evening, thank you. 2  BIS Review 45/2009