samchain/econo-pairs-v1 huggingface dataset:
The flow of funds into the US was re-exported to the advanced economies, especially through the growing securitisation markets, and helped finance the rapid increases in house prices in the UK (Chart 2) and many other countries. And that internationalisation of markets was reflected also in the build up in our banks of portfolios of AAA-rated securities which offered a slightly better yield than traditional bonds and many of which were based on sub-prime assets. BIS Review 145/2008  1  So when losses emerged in sub-prime market, they not only hit US banks but ricocheted through the international financial system. Much of the commentary has focused on the structured credit losses in banks’ trading books and treasuries and they have certainly been large. But equally as important was the impact on the liability side of balance sheets. Banks had not only expanded their balance sheets too far, they had in the process become reliant on wholesale funding markets which had not been tested in a downturn. In the UK, the gap between customer lending and deposits moved from zero at the turn of the century to over £ billion in 2008 H1 (Chart 3). That proved a structural weakness when investors realised that the AAA label concealed substantial and uncertain risks and withdrew from the securitisation markets. Just as the origins of the crisis lay in global imbalances its effects are also global.

Our new approach is designed to counter the risk that policy is too accommodating in upswings and too harsh in downturns. Two important principles stand out for me: first, that we must carry out financial regulation with an eye on conditions in the real economy, which means promoting stable and sustainable credit creation and growth; and second, we should always be prepared to look to the risks ahead, and exercise sensible judgment. The financial crisis has taught us in the most painful way of the dangers of waiting too long to take action and then being unable to prevent the worst consequences of delay. The FPC has recommended that British banks make sure their capital level is high enough to withstand future threats. Some banks will need to increase their equity capital for a given level of risk in their balance sheets. Concerns have been expressed that this change will harm lending to the UK economy. I do not agree with these concerns. Equity capital is not money that has to be stashed away for a rainy day and thus put to no good use. It is the shareholders’ stake in the company. In nonfinancial companies, shareholder capital or equity is used to finance the acquisition of assets. The same is true for banks. Equity finances the provision of loans to households and companies, and those loans are the banks’ assets. In that sense, capital supports lending by banks and does not substitute for it.
My role today as the opening speaker is a privileged one. Like a university professor during exams, I can ask questions. Unlike a good professor, I am certainly not in possession of all the answers. I am confident, however, that the exceptional group of people assembled here will make a positive contribution to this difficult and complex debate. II. The problem  Arguably, much of the debate surrounding the international monetary system boils down to the following question: how sustainable is an international monetary regime, in which one national currency serves as the international reserve asset? Over the past few decades, this question has been examined under different perspectives. A first perspective was the so-called “Triffin dilemma”, discussed in the context of the Bretton Woods fixed exchange rate regime. This discussion highlighted that increasing indebtedness of the reserve-issuing country would in time undermine the very confidence that forms the basis for the reserve asset status. A second perspective refers to the alleged “exorbitant privilege” of the reserve-issuing country. It highlights the asymmetry in the adjustment to shocks, as the reserve-issuing country has the privilege of not being under much pressure to adjust to current account deficits, at least over the short and medium term. It is worth noting that part of Keynes’ goal in setting up the IMF was to try to create symmetry between the need to adjust for both deficit and surplus countries. More recently, the question appeared under the perspective of global imbalances.

The third panel, chaired by Duvvuri Subbarao, will take up the question of how to deal with these vulnerabilities. What are the appropriate policy responses, and what is the role for regulation and capital controls? One policy response has been the accumulation of reserves, which can provide a temporary shock absorber. However, reserve accumulation entails costs for the countries accumulating reserves as well as for the world economy as a whole. Our last panel, chaired by Masaaki Shirakawa, will discuss alternatives to self-insurance. An obvious question here is the role of IMF lending facilities. 2  BIS Review 65/2010  As already mentioned, the questions we address today are difficult and complex. Someone who played an important role in trying to address them over several decades was Jacques Polak. Sadly, he passed away earlier this year. Reflecting on the efforts to reform the international monetary system since the Bretton Woods conference, Jacques Polak once suggested that “those of us who toil at the international monetary system would do well to adopt Sisyphus as our patron saint”. In honor of Jacques Polak, let us then push the stone back up the mountain once more and start with our first panel. Thank you for your kind attention. BIS Review 65/2010  3
But in Spain, regardless of the political party in power, the pro-European approach is guaranteed, even when you look at the two extremes, Vox and Podemos. They don’t question the euro. Maybe they have different approaches regarding fiscal policy, but they don’t say they want to leave the euro. No, not at all. In fact, when you look at credit default swap (CDS) markets, the implied probability of Spain leaving the euro is very, very low. In the case of Italy, it is not very low. Is it possible, then, that part of the spread between Bonos and BTPs is due to that redenomination concern for Italy? Again, it’s not a matter of making comparisons between countries. In the case of Spain, the main reforms were labour market reforms and cleaning up the banks. Those are the drivers of Spain’s good performance, in my view. And those are the elements that have to be maintained over the coming years. De Nederlandsche Bank President Klaas Knot recently said that divergence among euro area countries is making it increasingly difficult to set a single monetary policy that fits all of them. He expressed concerns about the sustainability of ever-diverging trends. Would you agree with him? There are no ever-diverging trends. There is the concrete case of Italy, which is underperforming. But six or seven years ago the underperformers were Spain, Greece and Ireland, and now they are overperformers. It’s changed quite a lot.

The government’s planned infrastructure projects in the areas of road development, port and airport development, power generation and social infrastructure development, would also facilitate sustainable and broad-based growth. The external sector is expected to perform well in 2007 recording an overall balance of payments surplus of about US dollars 200 million, boosting the level of official reserves to US dollars 2,650 million or about 3 months of imports. Export growth is expected to continue in 2007 at around 10 per cent, benefiting from continuing high growth in the global economy, and opportunities offered by Free Trade Agreements. Imports are projected to grow at a higher rate of 12 per cent, reflecting increased demand for intermediate and investment goods. The Government’s Medium Term Macro Framework (MTMF) enunciated in the Fiscal Management Report 2007, indicates that the overall deficit in 2007 will be contained at around 7.2 per cent of GDP. To meet this target, adjustments have to be introduced in the areas of enhancing revenue through additional measures and improved tax administration, rationalisation of current expenditure and improvements in the government debt management. Public investment will also need to be maintained at a high level to provide complementary capital for private sector investment. In this background, the growth in Reserve money and Broad money for 2007 will need to be clearly targeted to support the smooth functioning of the economy while preventing the build-up of inflationary pressures and expectations.
Indeed, with the considerable benefit of hindsight, there can be little doubt that a significant component of credit growth served to create and nourish financial and economic imbalances that have ultimately proved unsustainable, most notably in the housing market. Where mortgages had once been scarce or expensive, they became cheap and readily available. House prices boomed (Chart 6). Institutional and psychological factors fuelled an asset price bubble in real estate. Supported by the dynamism of the real estate market, the peripheral economies grew rapidly. But the growth achieved was not balanced: sectors of the economy associated with the housing boom – construction and financial services – grew disproportionately (Chart 7), drawing resources away from other activities, raising concentrations in loan books and increasing macroeconomic vulnerability to sector-specific shocks. Rapid economic growth led to increased demand for imports, while strong wage growth put pressure on the price competitiveness of the tradable sector. Large deficits on the current account of the balance of payments therefore emerged (Chart 8). Inflows of financial capital from abroad – the proverbial “hot money” – were needed to finance the current account deficit. Such unbalanced growth also had important consequences for the fiscal accounts (Chart 9). The housing boom (and its positive impact on broader economic activity and spending) increased tax revenues, dramatically in some cases. These “windfall” increases in tax revenue were treated as structural rather than cyclical in nature, as the housing boom was prolonged and appeared to survive the cyclical weakness in activity in mid-decade.

As a result, euro area countries cannot afford to implement a sovereign default without suffering as a consequence of such a default a major breakdown of their financial, economic and social structure. There is no post-war example of a government in an industrialised economy restructuring its debt. For a euro area sovereign to seek to restructure its debt would be a huge leap into the unknown. This aspect is frequently omitted by financial analysts in their  10  The classic reference is Fischer. I (1933). “The debt-deflation theory of Great Depressions”, Econometrica 1(4), pp. 337–357. BIS central bankers’ speeches  5  newsletters or by commentators or academics in their short op-eds. And this is the reason why they do not get the point right when they state that default and restructuring is unavoidable in the euro area. The fourth difference is that, given the much greater depth and intensity of financial and economic integration in Europe, the strength of contagion across financial institutions and markets is potentially more significant within the euro area today than was the case in Asia in the 1990s. That is not to say that there was no contagion in the 1990s. But the cross-border exposures within the euro area are an order of magnitude greater than was the case for such intra-regional cross-holdings in Asian EMEs. This means that the potential for spillovers and a systemic area-wide crisis is much higher and has to be factored into the policy responses.
The Governing Council supports the steps taken by the Commission to maintain the functioning of the framework, including the implementation of excessive deficit procedures and the issuing of early warnings, where required. Furthermore, I should also like to stress that it is the implementation of structural reforms at the micro level that ultimately raises the production potential in the euro area. By improving flexibility in the economy and making the euro area more resilient to external shocks, structural reforms will also reduce the high level of unemployment. The slow progress in structural reform is one of the key factors currently hampering a recovery in confidence. Against this background, the Governing Council welcomes the recent communication by the Commission on the implementation of the Broad Economic Policy Guidelines. Renewed momentum in the process of structural reform will not only be crucial to foster confidence among consumers and investors in long-term growth and employment opportunities in the euro area, but it should also have a positive effect on spending and investment decisions in the short and medium term. Finally, I should like to mention that after four years of practice with our monetary policy strategy, the Governing Council has considered that it is the appropriate point in time to take stock of our experience so far and to reflect on the various elements of the strategy. All this does not necessarily imply that we see a need for any changes.

News conference  Berne, 16 June 2022 Andréa M. Maechler  Introductory remarks by Andréa M. Maechler I will begin my remarks with a review of developments on the financial markets over the past half-year. I would then like to discuss the lowering of the threshold factor mentioned by Thomas Jordan. Situation on the financial markets Volatility on the financial markets has increased again significantly since the beginning of the year (cf. chart 1). This was driven by the sharp rise in inflation abroad and by attendant expectations regarding a speedier tightening of monetary policy – especially in the US. Indeed, the Fed has already raised the target range for its federal funds rate in several increments and signalled its intention to increase rates further. In addition, the war in Ukraine and the associated sanctions have exacerbated existing supply bottlenecks and led to surges in energy and commodity prices. These developments have dampened growth expectations and increased uncertainty on the financial markets. On the government bond markets, the change in monetary policy direction has had a pronounced impact. In the US, nominal ten-year Treasury yields have risen almost 2 percentage points since the beginning of the year and most recently were standing at well above 3%. Shorter maturities were particularly affected by this revaluation, with a narrowing of yield differentials between long and short maturities. Such a flattening of yield curves is typical in a period of rising inflation and interest rate expectations.
Independent central bank, inflation target and openness This time inconsistency problem which affects economic policy was first noted by Finn Kydland and Edward Prescott in the late 1970s. 3 One proposal that was put forward to address this problem was to introduce independent central banks which build up credibility by succeeding in maintaining low inflation and having realistic ambitions with regard to stabilising resource utilisation. To do this, the central banks must be able to take quick and sometimes unpopular decisions. If a central bank succeeds in attaining credibility so that inflation expectations are stable, there is some scope for also taking into account developments in the real economy. 4 It is thus also important from a stability perspective to find a means of attaining credibility and stable inflation expectations. As one of the steps to achieving this many central banks, including the Riksbank, introduced explicit inflation targets in the 1990s. In practice, most central banks now conduct flexible inflation targeting to attain the inflation target and also stabilise resource utilisation. This means that the central bank is not prepared to attain the inflation target in the short run at any cost. The Riksbank’s aim is that if inflation deviates from target it shall normally be brought back on target within a couple of years. In the case of large deviations it may take longer before the target is attained so that the effects on the real economy are not excessive. Because monetary policy works with a lag, the decisions must be based on forecasts.

The influence of monetary policy in the short and long run – research At the end of the 1950s the economist A. W. Phillips found a negative relationship between unemployment and inflation by studying data from the UK for the period 1861-1957 1 , a relationship that is usually referred to as the Phillips curve. This shows that higher employment can be achieved at the cost of higher inflation. It was thus long believed that one could "buy” long-term lower unemployment by pushing up inflation. However this relationship was empirically proved not to hold in the long run. In the 1970s, for instance, there were periods with both high unemployment and high inflation, what is known as stagflation. The relationship was also tackled from a theoretical angle. In a famous article from the late 1960s Milton Friedman discussed what monetary policy can and cannot achieve. 2 His view was that in the long run monetary policy is unable to affect real economic variables such as unemployment and GDP. However, it can affect nominal variables such as the exchange rate and price level. In the long run there is a "natural” level of unemployment that is dependent on the functioning of the labour market. If monetary policy tries to push down unemployment below this "natural" level, it will only result in higher inflation. Monetary policy therefore risks becoming a disturbing factor in the economy.
If the monetary authority were to commit to a program 1/3  BIS central bankers' speeches  of asset purchases until some economic objective is reached and, at the same time, were to make it clear that the policy rate would not begin to rise until the asset purchase program were completed, these steps might help anchor expectations about the likely path of short-term rates more effectively. The Federal Reserve’s third round of LSAPs, which was open-ended, was an important innovation of policy that the paper might have discussed in greater detail. I also don’t agree with the paper’s conclusions about agency MBS purchases. Such purchases do not represent “credit easing” as argued in the paper. The government’s interventions to support Fannie Mae and Freddie Mac have made it clear that there is no credit risk in the Federal Reserve’s purchase of such obligations. Also, the authors don’t acknowledge that the ability to purchase agency MBS has two benefits. First, it enables the Federal Reserve to purchase longer-duration assets at a faster pace without disrupting market functioning. This facilitates larger LSAP programs, when a larger program is viewed as necessary. Second, it opens up another channel by which asset purchases can provide stimulus—by narrowing the spread between agency MBS and Treasuries, the Federal Reserve can drive down long-term mortgage rates and provide support to the housing sector and to home prices.

The employment level and wage growth are generally good; economic expectations are high. A notable feature of the Nordic-Baltic markets is their high level of integration. Let's take the example of Estonia. Last year, Finland and Sweden accounted for about 40 percent of Estonian exports and 30 percent of imports. In the stock of FDI, the share of Sweden and Finland is about 75 percent. Cross-border financial integration is all but complete, with the market share of Nordic financial institutions accounting for 99 percent of bank loans and leasing. A long list of Nordic companies regards Estonia and the other Baltic countries as their home market. Therefore, many important business functions, for example liquidity and risk management, are increasingly run on a group-wide basis. Viewing the Baltic countries as a part of the home market, Nordic companies take a long-term business view. This lowers the risk of sudden slowdown or reversal of capital flows, often named as the main risk in the Baltic environment of strong credit growth and high current account deficits. A bit of history: entry of Nordic banks Of course this high degree of integration has been achieved over time. In the Baltic countries, today's level of economic and financial development was a distant dream as recently as 10 years ago. The fall in GDP bottomed out in mid-1990s. The following years have brought rapid output growth. In Estonia, for example, the level of real GDP has more than doubled.
Durmuş Yilmaz: Recent economic and financial developments in Turkey Opening speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the 78th Ordinary Meeting of the General Assembly, Ankara, 20 April 2010. *  *  *  I. Introduction  1. Esteemed Shareholders, Distinguished Guests and Members of the Press, Welcome to the 78th Ordinary Meeting of the General Assembly of the Central Bank of the Republic of Turkey. 2. I would like to start my speech with a brief evaluation of the global financial crisis that deepened to spread over the whole world in the final quarter of 2008 and took its toll throughout 2009. Later on, I will summarize the key macroeconomic developments that took place in Turkey in 2009. Finally, I will share my evaluations pertaining to inflation developments and monetary policy implementations. II. Global economic developments  Distinguished Guests, 3. The effects of the financial crisis, which first started in advanced countries and deepened mainly due to the bankruptcy of some major financial firms in the USA in September 2008, continued to dominate financial markets throughout 2009. Accordingly, growth rates slumped globally but particularly in advanced countries. Owing to extensive liquidity operations led by central banks and large-scale government interventions, the effects of the crisis started to subside as of the second half of 2009 and the global economy exhibited signs of a slow and gradual recovery. 4.

At this point, I would like to emphasize that we closely monitor pricing behavior as inflation hovers around high levels, albeit for a temporary period. I would like to hereby remind you that we will provide public with the updated evaluations and forecasts on medium-term inflation outlook along with possible risks and policy measures, more extensively in the Inflation Report to be published on 29 April. BIS Review 68/2010  13  Distinguished Guests, 37. Throughout 2009, as the Central Bank, we focused on policies oriented towards containing the adverse effects of the crisis on the economic activity and on financial stability while also overseeing price stability. Thanks to the experience gained from domestic crises in the recent past, we were able to make prompt and effective decisions, thus we were able to do our part to minimize the adverse impacts of the global crisis. In this period, the soundness of the financial system in addition to the relatively limited deterioration in the risk premium provided monetary policy with an extra room for maneuver. 38. Accordingly, envisioning that undershooting the inflation target at year-end has been more likely, we continued the rate cut cycle that we initiated in November 2008 by pursuing a front-loaded monetary policy in early 2009.