samchain/econo-pairs-v1 huggingface dataset:
This has contributed to the financing of the economy and has helped to contain the impact of the crisis on economic activity and price developments. The spread between the three-month unsecured money market rate, Euribor, and the three-month overnight index swap rate (Eonia swap rate), a widely-used measure of interbank market tensions, declined by almost 130 basis points over the past seven months, from the highs of above 180 basis points recorded in October 2008 to just below 60 basis points in mid-May 2009. 6 Moreover, the levels of money market rates have declined even more from the peaks reached last October. For example, the three-month Euribor rate was 1.26% at the beginning of this week (26 May), more than 400 basis points lower that its peak value (5.39%) last October. Moreover, the increasing transaction volumes in the unsecured interbank market and the lower utilisation of the ECB’s deposit facility indicate that market liquidity has improved significantly. It is sometimes claimed that money market conditions in the euro area are considerably tighter than in other major money markets. The facts disprove such assertions. The current levels of interest rates in the euro money market compare very favourably with the levels of the corresponding interest rates in the dollar and pound sterling money markets, where interest rate spreads and levels have also declined sharply over the past few months.

In order to restore an adequate flow of credit to the economy, banks should take advantage of governments’ commitments to support banks’ balance sheets through capital injections, the provision of government guarantees on new bank debt, as well as through asset relief schemes aiming at removing troubled assets from banks’ balance sheets. The common goals of these government measures in Europe and elsewhere are to safeguard financial stability, help restore the provision of credit to the economy and bolster confidence in the soundness of the financial system and in the prospects of the economy. Needless to say, the ongoing structural adjustment in the banking sector and the low confidence of investors in the soundness of some institutions cannot be counteracted by monetary policy and the provision of central bank liquidity. IV. Bank support measures and fiscal stimulus  At present, the European economy is experiencing a mutually reinforcing interaction between, on the one hand, the weakening of economic activity and rising unemployment, and, on the other hand, the deleveraging of banks’ balance sheets and the persisting bank stresses in some bank funding markets. The deleveraging process and the emergence of an adverse feedback loop between the real economy and the financial sector will affect the favourable impact of monetary policy and liquidity provision on the economy. These developments underscore the importance of effective implementation of the government measures to strengthen bank balance sheets and improve banks’ medium-term market funding.
And for an asset to be considered a unit of account, it must be able to be used as a medium of exchange across a variety of transactions over time between several people. 5  The hierarchy points to the reality that money is a social convention. We accept that a token has value whether made of metal, polymer or code because we expect that others will also do so readily and easily. 4  These characters currently feature on banknotes issued by private banks in Scotland. For this reason, some economists consider the operation as a unit of account to be the most important characteristic of money. Indeed, it is commonly argued that a defining feature of monetary policy lies in central banks’ control of the unit of account. See Ali, R., Barrdear, J., Clews, R. and Southgate, J., (2014) ‘The economics of digital currencies’, Bank of England Quarterly Bulletin, 2014 Q3. 5  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Figure 2: The three functions of money  The tokens representing money have taken many forms over the millennia from cowry shells in ancient times to cigarettes during the Second World War and mobile phone minutes in modern Kenya. And so it was when the Bank of England was founded in 1694 by a Scot, William Paterson. Originally its mission (“to promote the good of the people”) was fulfilled by issuing hand-written banknotes, backed by and exchangeable into gold, to help finance King William III’s war with France.

Trichet: It is of key importance that the ECB’s independence is guaranteed by an international treaty and not just by national law. National laws can be adopted, but they can also be overturned again. FOCUS: Nevertheless, time and again the heads of state of some countries try to pressure the ECB into decisions – usually the lowering of interest rates. Trichet: I remember well that in 2004, shortly after I took office, the then German, French and Italian heads of state or government made public remarks to the effect that the ECB should reduce interest rates. We didn’t do it. FOCUS: Now, in a reversal of roles, the ECB must put pressure on many European governments. National deficits have increased so drastically as a result of the financial crisis that all EU Member States are violating the debt ceiling put in place by the Maastricht Treaty. Trichet: The Stability and Growth Pact is a fundamental economic pillar of Economic and Monetary Union. We will always call upon national governments to comply with it. FOCUS: Greece is currently brazenly violating the 3% debt limit, with its budget deficit standing at 13%. Is Greece showing you a lack of respect? Trichet: Greece has not respected the Stability and Growth Pact. Not only Greece, but also other countries – that goes without saying – must do everything they can to put their national finances in order, bringing them fully into line with the provisions of the Stability and Growth Pact.
Policymakers now had the capacity to expand the size of the Fed’s liquidity facilities and other programs without the threat of compromising the control of monetary policy. This new tool immediately proved enormously helpful. The Fed was able to respond to the deterioration of conditions in the fall of 2008 by sharply increasing the size of its Term Auction Facility program and removing the limits on the size of many of the foreign exchange swap programs. These programs, along with the increased use of the Fed’s standing liquidity facilities and the start-up of the Commercial Paper Funding Facility in late October, led to a sharp growth in the Federal Reserve’s balance sheet beginning in late September. The third phase is marked by the launch of the Fed’s purchase programs, starting with the agency debt program that began in December 2008 and extends through to the present. During this phase, the Fed’s overall balance sheet has actually declined slightly. The demand for the Fed’s special liquidity programs has diminished more quickly than the purchase programs have been ramped up. Although this shrinkage was not anticipated or targeted, it is a welcome indication that there has been improvement in the functioning of the short-term funding markets. 1 As market function has improved and credit spreads have narrowed, many of the Fed’s liquidity facilities have become less attractive and there has been a corresponding decline in usage.

Second, unlike interbank funding, central bank refinancing over a 30-day horizon would not count as an outflow in the denominator of LCR, as it always benefits from a 100% rollover rate. As a result of these two features taken together, this could increase demand for central bank refinancing. Banks could exploit regulatory arbitrage opportunities by posting non-HQLA as collateral, which would lead to an increase in the LCR.12 While this also  9  An exception is Hilberg and Hollmayr (2011). They extend a New-Keynesian model introducing an interbank market and allowing the central banks to alleviate the liquidity shortage on the interbank market varying haircuts on eligible assets; see B. Hilberg and J. Hollmayr (2011), “Asset prices, collateral and unconventional monetary policy in a DSGE model”, European Central Bank working paper series, No 1373. For a discussion on collateral used in private transactions see G. Gorton and A. Metrick (op. cit.) and J. Geanakoplos (2010), “The Leverage Cycle” in D. Acemoglu, K. Rogoff and M. Woodford, eds., NBER Macroeconomic Annual 2009, vol. 24, pp. 1–65, University of Chicago Press. 10  Bindseil (2013) discusses how the collateral framework can interact with liquidity regulation; see U. Bindseil (2013) “Central bank collateral, asset fire sales, regulation, and liquidity”, mimeo, European Central Bank. For a description of the Eurosystem collateral framework, see the ECB website, http://www.ecb.europa.eu/ paym/coll/html/index.en.html.
15 16  In particular, the range of the terminal rate estimated with our models is between 1.75% and 3%. See the September ECB Survey of Monetary Analysts. 17  See, for instance, Costain, J., G. Nuño, and C. Thomas, “The Term Structure on Interest Rates in a Heterogeneous Monetary Union", Banco de España Working Paper 2223, 2022. 7  longer maturities, causing a tightening in overall financing conditions over and above that implied by our policy rate path. Therefore, to achieve the same degree of tightening withour overall policy toolkit, short-term rates would not need to increase by so much. Similarly, the run-off of the outstanding TLTRO-III operations in the next two years will entail a significant reduction in the size of the Eurosystem balance sheet, which may also contribute to the normalisation of our monetary policy stance. In this case, however, markets are probably already expecting this automatic reduction in the size of the balance sheet stemming from TLTRO-III. These considerations point to the need to reflect upon the right combination of interest rate increases and quantitative tightening in the coming quarters. Conclusion Let me conclude. There are a few key takeaways from today’s talk that I would like to emphasise. First, euro area inflation has risen mainly due to energy (and food) shocks outside of our control. This does not mean that we at the ECB Governing Council should remain idle. We should continue normalising our monetary policy in order to avoid the emergence of secondround effects and a de-anchoring of inflation expectations.

29.09.2022  Monetary policy in the euro area: where do we stand and where are we going? XXI Congreso de Directivos CEDE, Bilbao Pablo Hernández de Cos Governor  Your Majesty, authorities, ladies and gentlemen, Let me start by thanking the organisers for the opportunity to address you at this XXI CEDE Congress. Today, I will elaborate on how we can bring price stability back to European citizens in the context of current turmoil as it is the responsibility of the ECB’s Governing Council to bring inflation down to 2% in the medium term, the inflation target that operationalises our price stability mandate.1 And we have to do this in none too easy times. After a pandemic that has cost more than a million lives in Europe alone, and with a war of aggression in Ukraine, European households are experiencing a drastic surge in their costs of living. Consumer prices in the euro area rose by 9.1 % in August compared to the previous year, an all-time high for the monetary union. The increase in prices has been especially acute in the energy and food components of the consumption basket. But it has become more general over time, as reflected in an underlying inflation rate of 4.3 % in August, another record high, reflecting to a large extent indirect effects of higher energy and food commodity prices through firms’ production costs.
10.09.2019  Global Imbalances and Capital Flows in the Era of New Technologies Opening Remarks - Banco de España and the Reinventing Bretton Woods Committee Pablo Hernández de Cos Governor  Ladies and gentlemen, I am delighted to welcome you to this conference on global imbalances and capital flows in the era of new technologies. The Banco de España is particularly honoured to be co-organising it in collaboration with the Reinventing Bretton Woods Committee on the 75th anniversary of the Bretton Woods agreements. Indeed, an anniversary to celebrate, and a unique opportunity to praise the merits and achievements of the rules-based system set by these agreements. But it is also high time to reflect on the challenges facing our current framework of global economic governance inspired by the agreements. The core values of multilateralism and international cooperation that guided the Bretton Woods agreements in the past, are at least as necessary today as, with hindsight, they were 75 years ago. Admittedly, the world has changed rapidly and profoundly. In such an evolving context, some “tailoring” to update international economic governance may be warranted, precisely to ensure that the core values that have promoted international cooperation will continue to do so in the future. In particular, over the last few decades we have been witnessing the emergence of new economic, political and geostrategic powers, as well as new challenges: population aging, migrations, security threats, social inclusion, and climate change, to name just a few.

The majority of countries with relatively strong GDP growth rates prior to the crisis also experienced a relatively strong downward adjustment, in some cases undoing much of the welfare gains that were achieved since the launch of the euro. Some might see this as evidence that the assumptions of the neoclassical growth model need to be qualified – that absent credit-driven growth, there is no reason to believe that euro area economies should converge towards similar levels of productivity, or even rates of productivity growth.12 Indeed, endogenous growth models allow for persistent divergences as some forms of capital exhibit non-diminishing returns. Yet, I think it is too early to draw such a conclusion. The neo-classical assumptions have not yet been properly tested, simply because capital did not flow where the marginal return would have been highest. What the euro area needs, in my view, is to “re-run” the convergence process, but with the appropriate conditions in place to ensure efficient allocation of resources, and the right framework to make convergence sustainable. Let me explain in more detail what that might entail. To begin with, catching-up economies have to address the immediate after-effects of the previous misallocation of capital. The pre-crisis inflows into the non-tradable/services sector were associated with real exchange rate appreciation, rising unit labour costs (ULC) and increasing dependence on external financing. When the financial cycle turned, however, capital flows quickly reversed.
Thus it is important to avoid borrowing more than necessary and to emerge as soon as possible from our current state of imbalance. Before I turn to the economic outlook and the Monetary Policy Committee’s most recent interest rate decision, I consider it necessary to say a few words about the nature of the adjustment the Icelandic economy is currently undergoing. First of all, it should be borne in mind that the year 2009 would have been extremely difficult in any case, no matter whether the banks had collapsed or not. This is because of the huge macroeconomic imbalances that developed in the Icelandic economy in 2005-2007 and had to subside in one way or another. Second, the collapse of the banking system called unavoidably for an additional adjustment in the structure of the economy. We can summarise this as follows: The enormous current account deficit had to go, and the financial system and various other bubble-related operations had become far too large and had to be downsized. This involves considerable unemployment, partly because of layoffs in the sectors that have contracted and the lag time before new commercial activities can be established. Tradable sectors must be reinforced. The key to hastening that process is re-establishing an effective financial system. Although the currency may have played a role in creating the problem, the depreciation is also part of the adjustment, and it is accompanied by transitory inflation.

It would have been tempting to take somewhat greater short-term risk with the exchange rate and direct monetary policy more toward domestic economic conditions and the inflation outlook, but the enormous damage that even a short-lived additional depreciation would have done to private sector balance sheets precluded such an approach. Under conventional circumstances, inflation-targeting monetary policy can be described, albeit in an oversimplified way, as entailing a policy interest rate that takes into account three factors: 1) the desired policy rate when inflation is at target and GDP is at potential; 2) the output gap; and 3) the deviation of inflation from target. In the case of Iceland, the exchange rate must be added to this list, and with a heavy weight. But the weight of the other items is not zero, and the importance of the exchange rate should diminish as the financial crisis relinquishes its grip and we reduce the weight of foreign debt in private sector balance sheets, thereby reducing the impact of the exchange rate on domestic liabilities. One of the Monetary Policy Committee’s many tasks at present is to assess how these various weights should evolve as circumstances change. Indicators presented at the most recent Monetary Policy Committee meeting suggest that foreign-denominated debt may weigh less heavily in corporate sector debt than was previously believed, and that it is currently diminishing in importance for both households and businesses. Before the banks collapsed, an average of 70% of corporate sector debt was denominated in foreign currency. But the distribution is quite skewed.
5  All speeches are available online at www.bankofengland.co.uk/speeches  5  In their current form, these innovations are simply a new front-end to the banking system where FinTech providers take a slice of customer revenue and loyalty but none of the associated risks. They have generally avoided undertaking traditional banking activities. So for now, absent a substantive change in business models or scale of activities, the FPC is unlikely to want to bring these firms into the regulatory perimeter. 11  The changes to customer relationships resulting from FinTech competition could, however, reduce customer loyalty and the stability of funding of incumbent banks. If this happens, the Bank of England would need to ensure prudential standards and resolution regimes for the affected banks are sufficiently robust to these risks. Figure 2: Financial Services Value Chain and Our Infrastructure  10  For an overview of the changes occurring further along the value chain see: “The promise of FinTech: something new under the sun?”, a speech given by Mark Carney on 25 January 2017, at the Deutsche Bundesbank G20 conference on “Digitising finance, financial inclusion and financial literacy”, Wiesbaden. Available at: http://www.bankofengland.co.uk/publications/Pages/speeches/2017/956.aspx 11 Were any FinTech providers to become systemic in their own right, they could be brought into the regulatory perimeter; this could be under the existing statutory framework for designating systemic financial market infrastructure (FMIs), for example.

When it comes to the question of which payment instruments should become the credit transfer and direct debit schemes used for euro payments in the EU, for me it is obvious that the answer is the SCT and SDD. This is, in fact, the position of the Eurosystem, which was clearly communicated in the seventh SEPA  1  The survey involved 42 European banks in nine countries. See the press release (in German) available at: http://www.bearingpoint.de/PMI_SEPA_081110.pdf  BIS Review 159/2010  1  progress report. Of course, it is one thing to set a goal, but it is far harder to achieve it. However, I am confident that the European Commission will make this possible through a legislative proposal. Despite the debate surrounding the end date in the past few weeks, we should not forget that we all share the same goal: we all want to make SEPA a reality. Of course, SEPA will only be a success story if it goes beyond credit transfers and direct debits. This brings me to my next New Year’s resolution: New Year’s resolution number two: let’s establish the requirements for a competitive cards market Any cards market should meet a number of requirements in order to facilitate competition and efficiency. The principle of separating card scheme management from processing entities is one of the core elements of SEPA that aims to guarantee open access. The SEPA credit transfer and direct debit schemes are built on this principle; it should be applied in the cards market too.
•  The risks to financial stability are nowhere near pre-Crisis levels, but they bear close watching. We must not repeat the mistakes of the past. 11 But there is as yet no consensus on how to secure financial stability and, in particular, what role, if any should be played by monetary policy. 12  There are three broad approaches to these questions. •  The first is to stick to the status quo. Monetary policy remains focused on price stability and no recourse is made to macroprudential policy beyond the use of capital buffers to pre-empt insolvencies. •  In the second approach, monetary policy explicitly takes account of financial stability in addition to price stability. •  Under the third approach, monetary policy remains focused on price stability, while financial stability is secured with the help of macroprudential policy. 13 I will keep my remarks on the first approach brief as it is well-known and is still the dominant practice in most central banks today, especially in the advanced economies. Under this inflation targeting approach, monetary policy will not try to respond to credit cycles or asset bubbles unless they have a demonstrable impact on inflation outcomes. •  As Lars Svensson puts it, flexible inflation targeting “remains the best-practice monetary policy before, during, and after the financial crisis”. •  John Taylor, who will address us this evening, provides a more rule-based characterisation of this approach through the Taylor rule.

Norges Bank’s mandate provides a basis for the conduct of monetary policy: “Monetary policy shall be aimed at stability in the Norwegian krone’s national and international value, contributing to stable expectations concerning exchange rate developments. At the same time, monetary policy shall underpin fiscal policy by contributing to stable developments in output and employment. Norges Bank is responsible for the implementation of monetary policy. Norges Bank’s implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time. [...]” The responsibility for implementing monetary policy is delegated to Norges Bank pursuant to the Norges Bank Act and the appurtenant Regulation. The Bank sets interest rates based on our interpretation of the Regulation. In our interpretation, we give weight to the Government’s rationale for the Regulation, to the purpose as expressed in the first section, and to our knowledge about the relationships between the interest rate, the exchange rate, output, employment and inflation. The first sentence in the mandate refers to the value of the krone. Stability in the krone’s internal value implies that inflation must be low and stable. Low and stable inflation contributes to economic growth and to stability in financial and property markets. The Regulation also states that monetary policy shall be aimed at stability in the Norwegian krone’s external value, contributing to stable expectations concerning exchange rate developments.