samchain/econo-pairs-v1 huggingface dataset:
Rather, the purpose is to overcome weaknesses in our analytical tools related to the possible buildup of financial imbalances resulting from keeping interest rates low over time. Monetary policy will continue to react to shocks that affect the medium term path for inflation, output and employment. After a decade of learning, inflation targeting has become more flexible. Flexibility is good to have, and easy to lose. The inflation target has to be reached over time, otherwise our credibility is put at risk. In assessing various considerations, monetary policy must be geared to meeting its primary objective of low and stable inflation. There are limits as to how many goals monetary policy can meet. Other instruments must be used to attain other objectives. To ensure that new or further financial imbalances do not build up we also need a tighter international overarching policy framework to address the stability of the financial system as a whole. A macroprudential policy framework should be part of this new framework. Macroprudential policy framework Financial market participants can trigger self-reinforcing economic fluctuations. Individual banks and investors do not necessarily take into account the overall risk in the financial system. The consequences became clear during the financial crisis: banks had inadequate equity capital, relied excessively on short-term wholesale funding and had insufficient buffers of liquid assets. 2  BIS central bankers’ speeches  The new international regulatory framework is intended to remedy this situation.

A decade of inflation targeting The Norwegian economy emerged quickly and fairly painlessly from the recent global economic downturn. Since 2001, economic policy in Norway has been guided by a fiscal rule and a flexible inflation target. With solid government finances based partly on petroleum revenues and firmly anchored inflation expectations, there was room for manoeuvre both in monetary and fiscal policy when the financial crises hit. Inflation in Norway is currently low, but it has been close to target over the past decade. During this period, monetary policy has faced demanding trade-offs, and the application of judgment has been put to a test. We have gradually learned more about the functioning of our economy under an inflation targeting regime. Let me touch upon some of these insights. Fairly soon after we had adopted inflation targeting, we learned how demanding it may be to strike a balance between different monetary policy considerations in a small open economy. When the key policy rate is raised to restrain a pronounced rise in domestic inflation, it may strongly impact the exchange rate, as we experienced in the period 2002–2003. Both the real economy and inflation were affected. Midway through the decade, global inflation rapidly declined. China’s entry into the WTO, and increased imports from Asia to the west led to a persistent fall in import prices. The combination of very low inflation and strong economic growth posed new challenges for monetary policy. Interest rates – both in Norway and abroad – were set at low levels.
There are several reasons for this:  4  BIS Review 65/2008  First, labour has flowed into Norway from other countries. The opening of the labour market to the new EU countries has provided us with access to a reserve of labour. Initially, workers came to Norway on short-term assignments. They produced in Norway, but their consumption largely took place in their home country, with an attendant increase in the economy’s net production capacity. An increasing number of workers subsequently moved to Norway and took up residence here, often accompanied by their families. This still increases production, although the higher number of foreign workers who want to settle in Norway also puts added pressure on domestic resources. Per capita output is not likely to increase as a result of this kind of immigration. Access to foreign labour may nonetheless relieve shortterm bottlenecks in some sectors. In 2007, the population increased by about 55 000, with net immigration coming to 35 000. This is the highest rise in the population ever recorded. This trend seems to have continued so far this year. BIS Review 65/1008  5  Second, businesses in Norway have become more efficient in their operations, resulting in lower costs. It has been profitable to hire more employees despite the high wage level in Norway. The business sector has made use of new technology and businesses have been restructured. The many sweeping reforms of the 1980s and 1990s – the fundamental shift in 1 the Norwegian economy – resulted in more efficient markets.

Since December 2009, the yuan has appreciated almost four percent, while this figure is much closer to ten percent for most EMEs. The comparison is even more dramatic when looking at a longer period of time. This has been achieved through massive reserve accumulation and limited financial integration. However, for measures in the foreign exchange market to have real effects – that is, on the real exchange rate, which is the relevant variable from the point of view of competitiveness – these measures need to have some support from the real side of the economy. In the case of China, this is a very high savings rate. China saves about half of its GDP and the resulting current account surplus sustains a depreciated real exchange rate. Otherwise, attempts to maintain a depreciated nominal exchange rate sooner or later lead to inflation, which is the way to achieve relative price adjustment when the nominal exchange rate is not allowed to adjust. The U.S., in turn, is undertaking an extraordinary monetary expansion. Beyond having reached the zero lower bound for the federal funds rate, unconventional measures are adding additional monetary stimulus. In particular, the massive purchase of securities implemented in the so-called QE2 program. This explains why the dollar has reached its lowest level in several decades (Figure 3), but this is not only the result of expansionary monetary policy, but also of the lack of domestic demand and of the external imbalances.
30/09/2020  The LIBOR Countdown Has Not Stopped - FEDERAL RESERVE BANK of NEW YORK  SPEECH  The LIBOR Countdown Has Not Stopped September 29, 2020 Michael Held, Executive Vice President and General Counsel Remarks at the IMN Virtual Investors' Conference on LIBOR Thank you for that kind introduction, and for the opportunity to speak to you all today. As always, my remarks reflect my own views and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.1 The last time I spoke publicly about LIBOR transition was almost 18 months ago,2 when the end of LIBOR still seemed reasonably far away and the world in general seemed much more predictable. I said then that what kept me up most at night was whether my daughter would get into a good kindergarten in Brooklyn, but that reference rate reform was only a little further down the list. You’ll be relieved to know that my daughter is now in a great school, and it’s very close to home. In fact, it’s in our living room. A year and a half ago, I never could have anticipated how different and uncertain every single part of our lives would become. Now, there’s a whole host of new worries atop the list of things that keep me up at night. I’m sure that’s true for all of you as well, as individuals and families but also as leaders of institutions dealing with the bizarre and uncertain times we find ourselves in.

You should make sure that any other reference rate you use meets similarly high standards, and is fully transparent about how it’s calculated, what it’s based on, and exactly how it complies with the IOSCO principles. The ARRC and ISDA also went through an extensive public consultation process in constructing their recommended fallbacks that will kick in when LIBOR becomes unusable. The overriding goal of that process was to minimize value transfer and ensure as much as possible that the transition did not disadvantage borrowers or lenders, or one side of a LIBOR swap. And those are the same https://www.newyorkfed.org/newsevents/speeches/2020/hel200929  4/6  30/09/2020  The LIBOR Countdown Has Not Stopped - FEDERAL RESERVE BANK of NEW YORK  fallbacks that will apply under the ARRC’s proposed New York legislation. Anyone considering using different fallbacks should likewise keep those concerns top of mind. Making it Official Before I wrap up, I’d like to talk about the role of the official sector in the transition. It might seem at times that our role has consisted mostly of forming working groups and giving speeches where we harangue market participants to just get on with it already—kind of like this one. Of course, as I mentioned, the New York Fed has stepped up by producing SOFR, which is key to the transition.
Operational risk and infrastructure failures have played a prominent role in past financial crises, and the infrastructure weaknesses that have characterized the credit derivatives markets since their inception are an ongoing source of concern. The major market participants, both the dealers and the traditional and non-traditional investors, are in the process of improving the infrastructure that supports these markets. The changes underway to clean up the backlog of unconfirmed trades and to automate the entire post-trade-processing environment will help reduce operational risk in the derivatives market and reduce some sources of uncertainty that could exacerbate a market shock. The efforts underway to reach agreement on an approach for settlement in events of default are important for addressing the risks inherent in a market where the value of derivatives substantially exceeded the value of the underlying instruments. We are encouraged by the progress made to date, and will continue to encourage further improvements. Second, we believe that the major dealers, as well as the large commercial and investment banks, should take a cold, hard look at financing conditions and margin practice, particularly with respect to hedge fund counterparties and in OTC derivatives. The reports issued by the Counterparty Risk Management Policy Groups I and II both make the important observation that the financial system is likely to be more resilient under conditions of stress when counterparties set initial margins at levels that are likely to be sustainable in less benign conditions.

Measuring these broader risks is harder today because the classic array of historical stress events drawn from the past 25 years of financial crises are probably even less valuable than they were as an illustration of how market dynamics might unfold today in response to similar changes in asset prices and credit losses. Those past crises would likely cause less damage today, if they were to recur, because of the many changes in the structure of our financial system - namely, the greater dispersion of credit and market risk, the improvements in risk management, the size of the capital cushions, and the improvements in many parts of the payment and settlement infrastructure. But most crises come from the unanticipated. Assessing a firm’s exposure to risk in the tail of the distribution requires, among other things, an evaluation of the impact of the failure of a major counterparty and the impact that failure might have on other counterparties and on market prices. It requires, for the largest institutions, an understanding of the constraints the firm may face in its ability to adjust positions or hedge against further losses without amplifying the shock. And it requires anticipating potentially adverse effects on market liquidity, as other market participants react to actual and anticipated losses. In the financial system we have today, with less risk concentrated in banks, the probability of systemic financial crises may be lower than in traditional bank-centered financial systems.
Liquidity insurance facilities that underpin banks' funding are obviously helpful to that, as they increase the probability of bank-dealers being able to finance unwanted inventory. But some voices have argued that the authorities should act more directly to preserve market liquidity; or, in other words, that central banks should stand ready to act as a Market Maker of Last Resort. 23 Certainly, the profound changes in the structure of the financial system over recent decades should not leave us blindly attached to mid-19 century precepts. But nor can we be blind to the challenges in embarking on acting as MMLR. In the first place, whereas lending to a bank does with certainty give that bank more liquidity, entering a market as a buyer does not automatically enhance the liquidity of that market. Secondly, whereas central banks can protect themselves against the risk in secured loans by requiring more collateral if conditions deteriorate, an outright purchase is a one-off transaction; if we pay too much given the true risk, that’s that. cushion, a bank should hold a core of the most reliably liquid assets, such as cash and high quality government bonds or similar instruments, to guard against the most sever stress scenarios”. 23  For example see, Buiter W and Sibert A (2007), “The Central Bank as Market Maker of Last Resort”, Maverecon – Willem Buiter’s Blog (http://maverecon.blogspot.com/2007/08/central-bank-as-market-maker-oflast.html). This section has benefited from internal discussions with Kalin Nikolov and Roger Clews. 10  BIS Review 67/2009  So this is new territory.

27  Work is underway under the auspices of the Financial Stability Board, which published Principles endorsed by G20 heads of government in April; and in the Basel Committee of Banking Supervisors. These issues were also discussed recently by Eric Rosengren, President of the Federal Reserve Bank of Boston in a speech at the Institute of Regulation and Risk, Hong Kong, 5 May 2009 “Challenges in Resolving Systemically Important Financial Institutions”. 12  BIS Review 67/2009  many others have said, 28 we need to find a solution to Too-Big-To-Fail, or too interconnected, too complex – however one wants to think about it. That might involve requiring banks to have credible resolution plans for themselves, with higher regulatory capital and liquidity charges entailed if they do not. As we have seen across many countries during the current crisis, governments can otherwise end up having to provide capital support in order to prevent the financial system unravelling, with unfathomable costs for the real economy and so for households. The long lesson of history is that we must build a resilient system; but that we and our successors would be foolhardy to imagine that governments will never again need to provide capital to save the day. If that is right, then society needs principles and policies for what might be called “Capital of Last Resort”, to sit alongside the Lender of Last Resort (LOLR) principles developed by and for central banks since the 19th century. Clear and timeless principles in this area barely exist.
(2) Includes the United States, Japan, the United Kingdom and the Eurozone. (3) Includes Australia, Canada, Norway and New Zealand. Source: Central Bank of Chile based on data from CEIC and the International Monetary Fund. Figure 10 Long term indebtedness and financial burden (percentage of disposable income) 80  18  70  15  60  12  50  9  40  6  30  3  20  0  Jun.02  Jun.03  Jun.04  Jun.05  Jun.06  Indebtedness  Jun.07  Jun.08  Jun.09  Financial burden  Source: Central Bank of Chile based on information from SBIF, SVS, SuSeSo. BIS Review 9/2010  11  Figure 11 National employment and unemployment rate (seasonally-adjusted series, percent)  3  12  2  10  1  8  0  6  -1  4  -2  2  97  99  01  03  05  Quarterly change in employment  07  09  Unemployment rate  Sources: Central Bank of Chile and National Statistics Bureau (INE).

Thomas Jordan: Monetary policy in a climate of increased uncertainty Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the SNB Money Market Event, Geneva, 1 November 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Uncertainty about the extent and distribution of losses from US “subprime” mortgages has resulted in a marked squeeze on financial markets. In particular, there is considerable uncertainty concerning the true valuation of securitised assets and structured products based on subprime mortgages. Demand for liquidity has surged. In certain instances, the crisis of confidence among financial market participants was so pronounced that some markets did not function at all. The “re-pricing of risk” has caused risk premia for most financial instruments to soar. Risk premia are important for the Swiss National Bank (SNB) for two reasons. On the one hand, they act as economic signals and should therefore be as unbiased as possible in the way they reflect underlying risks. In addition, there are certain risks attached to extreme values of risk premia. Abrupt and uncontrolled corrections could lead to instability on financial markets and interfere with their smooth functioning. On the other hand, risk premia affect the restrictiveness of monetary policy. An increase in such premia tightens monetary policy. The SNB monetary policy concept, where the three-month Libor is at the centre of the implementation of monetary policy, takes systematic account of changes in risk premia.
Therefore, HKMA’s efforts to build a strong banking sector, including the distribution of maturity risks through the mortgage corporation and the creation of an efficient RTGS payment system are all necessary efforts to prevent an external shock from affecting the banking system. In particular, the RTGS system allows the HKMA to monitor closely banks’ settlement transactions on a real time basis. Banks would also have to fund their settlements and provide ample liquidity on a more prudent basis. All these are in line with our objective of making the markets more efficient to enable the free market to clear aggregate supply and demand at an equilibrium price quickly. 36. But we should always remember that there is no free lunch. The fixed exchange rate regime implies a flexible economy to adjust to the exchange rate. Hong Kong has high flexibility, attributable to a high savings rate, entrepreneurial spirit and high labour productivity. A fixed exchange rate is a discipline on both the private and public sectors: the economy adjusts to the exchange rate, not the other way around. We do not pretend to say that a fixed exchange rate is the perfect system, because even the IMF admits that there is no perfect system. But it is the best system for Hong Kong. The linked exchange rate system is here to stay. Conclusion 37. As one of the contributors to the World Bank study on the Asian Miracle, I have never considered the Asian growth story as a miracle. Paul Krugman called it perspiration, not inspiration.

In addition to the robust currency board mechanism, the linked exchange rate system is underpinned by some of the strongest fundamentals in Asia, if not the world:  •  Growth is strong, at 5.5%. •  Fiscal position has been consistently strong, with an average fiscal surplus averaging 2% of GDP for the past decade. Fiscal surplus in 1997 so far is 4.4% of GDP and is expected to exceed 5% of GDP. •  The government has no external debt. •  Exchange Fund and Land Fund together have more than $ billion in assets. •  Corporate debt ratios are amongst the lowest in Asia. •  The external account is broadly in balance. 32. The free markets and strong fundamentals mean that the nature of the shock is absorbable. Hong Kong does have a strong competitive edge, since we are a service economy with 83% in the services sector. As a major investor and integrator of production in the region, with manufacturing concerns in China and Southeast Asia, Hong Kong companies could adjust production to areas which have the greatest export competitiveness. In addition, the mainland Chinese economy is still growing at 8-9% per annum, with low inflation, a balanced external account and strong BIS Review 109/1997  commitment to reforms in the enterprise and financial sectors. All these auger well for Hong Kong as the main gateway to the Chinese market. 33. The current higher interest rates reflect somewhat a slightly higher risk premium in Asia due to the currency turmoil.
Criticising these two pillars is not only pointless, but is also dangerous: • Pointless: the ECB was able, within its institutional framework and mandate, to be active, innovative and responsive…even more than some political institutions. Damage the central bank’s independence and you undermine its strength and agility, the very things that protect an economy in a crisis. • Dangerous: these two pillars, enshrined in the Treaty, are the legal and democratic foundation of our legitimacy and capacity to act – and not only in “Northerners” eyes. Furthermore, they are the foundations of European’s trust in their currency. To give only one example: the Eurosystem cannot cancel public debt, neither legally nor “fiduciary”: a suspicion of fiscal dominance would give rise to monetary distrust as seen in history and more recently in some emerging market economies. Independence and the price stability mandate are not an obstacle to the ECB’s powerful action. On the contrary, they are its two best levers. I will come back to this. II. What European policies for the gradual exit? Talking about European solidarity, arguably, Europe could have done more. But let us not forget that the glass is at least half full, thanks to the major support from the Eurosystem, but also the SURE framework of the European Commission to help preserve jobs, and the welcome agreement last Friday on unconditional ESM [European Stability Mechanism] credit lines to finance health expenditure. Page 6 sur 10 Let us now look to the future.

3 In addition, agreements were entered into between central banks so that liquidity in different currencies could be provided across borders. Many banks were particularly in need of US dollar funding. After the failure of Lehman Brothers, the financial system became fully dependent on central bank funding. The situation required new instruments. Central banks supplied liquidity at longer maturities than normal and eased the collateral requirements for central bank loans. Many countries introduced government-guaranteed credit lines and swap lines for lending liquid securities – primarily government securities – against less liquid securities. In a number of countries, central banks have purchased both public and private bonds with longer maturities directly in the market. Private bonds have primarily been purchased with a view to improving liquidity and reducing bond premiums. The Government Bond Fund was also established for that purpose. Government bond purchases can influence long-term government bond yields and indirectly the interest rate on mortgage and corporate bonds and asset prices. Moreover, the Bank of England notes that the purchases increase the money supply, which can contribute to underpinning inflation expectations. It has not been relevant for Norges Bank to buy government bonds in the market. But we have also been highly active. As mentioned, we reduced the key policy rate from 15 September last year. We supplied substantial liquidity to the banks and eased the collateral requirements for loans. We entered into a credit agreement with the Federal Reserve and supplied US dollar liquidity to Norwegian banks.