samchain/econo-pairs-v1 huggingface dataset:
Over the Christmas holidays I read a book by the former US Treasury Secretary Robert Rubin.1 He takes up this issue and motivates why he strongly advised President Clinton against holding public opinions on monetary policy, advice followed by the President. According to Rubin, there is always a risk that the bond market will be affected if there is the slightest suspicion that the central banks' actions are governed by political pressure.2 I think that the fact that he - with his decades of experience on Wall Street - brings up this argument and that he does so despite the widespread respect enjoyed by Greenspan's Federal Reserve, shows that the argument cannot be waved aside. One could object that the Riksbank's legal independence is greater than that of the Federal Reserve. On the other hand, the low-inflation regime is relatively new in Sweden and our market is also small and influenced to a large degree by external agents, who often lack in-depth knowledge of how our system works. At present, the economic and political developments in Sweden are so stable that political manoeuvring of the type we have seen hardly has any effect on the markets, although some concern has been expressed by foreign analysts. However, politicians who enter the discussion with strong opinions in a stable situation should probably reflect over how they might act in future in more problematic situations.

It is clear that the labour market situation calls for moderate wage increases. Unlike the situation prevailing during the two previous bargaining rounds, unemployment has increased and employment has declined recently. Nor are there any labour shortages, other than in a few areas. It is also a positive sign that the rate of wage increase has been declining over the past year and that the same applied to expected inflation. Given the present low inflation rate, even limited nominal wage increases will lead to a fairly good development in real wages, which trade union representatives usually emphasise. The nominal wage increases put forward now are lower than those of recent years. Meanwhile, there is of course always a risk of shocks from the actual negotiation process. It is not unthinkable that some of the increase in productivity is used as justification for higher wage-paying capacity. This could be particularly worrying if the wage negotiations assume that the improvement in productivity is permanent and it later shows a rapid decline. At our meeting last week we considered that there was reason to make a further slight downward revision to unit labour cost figures, which in turn had effects on domestic inflationary pressure. The labour market has been weak and most indications are that there is reason to be slightly more pessimistic with regard to employment in future. The rate of wage increase could therefore be slightly lower than we assumed in December.
It continues to recommend that the big banks disclose RWA according to both the model-based approach and the model-independent standardised approach. This recommendation is in line with increasing efforts being made at international level. Disclosing RWA according to the standardised approach would provide market participants with additional information for assessing the level of, and changes in, model-based RWA. In this context, the analysis of RWA being carried out by FINMA with the support of the SNB will play an important role. The big banks have already provided the necessary data by calculating RWA based on the standardised approach. Now the analysis will focus on the question of whether, and why, RWA based on the banks’ internal models differ from those based on the model-independent standardised approach. Differences must be well explained and have a sound economic rationale. If the analysis does not reveal any substantial and inexplicable differences, this would strengthen the credibility of the model-based approach. Conversely, if substantial differences cannot be explained, corrective measures would need to be considered. Domestically focused commercial banks I would now like to turn to the domestically focused commercial banks. In 2013, these banks further increased their already high exposure to mortgage and real estate market risk. First, growth in domestically focused banks’ mortgage lending was almost unchanged from the previous year. By contrast, the big banks’ lending growth decreased significantly in 2013. Second, domestically focused banks’ risk appetite in mortgage lending remained high overall.

In the three Baltic countries the improvement was even more dramatic, averaging 17 percentage points since 2007. The composition of adjustment has also been encouraging. Aside from Ireland and, to some extent, the Baltics, import compression played a strong role in closing current account deficits in the first phase of the crisis. But since 2012, improvements in deficit countries have been driven predominantly by robust growth in exports. The previous dramatic fall in internal demand in stressed countries had in fact not only depressed imports. It had pushed firms to look for new international markets as well.1 Demand for exports in deficit countries has also been supported by intra-euro area rebalancing. In particular, though Germany continues to run a record overall current account surplus, its trade surplus vis-à-vis the euro area has diminished. It fell from close to 4% of GDP in late 2007 to around 1% of GDP today.2 Imports from the euro area have also increased notably. In this sense there has been some symmetry in the adjustment process. 1  See Bobeica, E., Esteves, P.S., Rua, A. and Staehr, K. (2015), “Exports and domestic demand pressure: a dynamic panel data model for the euro area countries”, ECB Working Paper Series, No 1777. 2  Bundesbank trade balance data corrected for the so-called “Rotterdam effect”, that is, the fact that German intra-area imports are “inflated” by imports from (mainly) the Netherlands which are actually imports from countries outside the euro area.
Chart 4: Tier 1 capital ratios to absorb trading book losses 12.00% 10.00%  11.02% 8.86% 8.73%  10.01% 8.94% 7.42%  8.00%  9.50%  7.56%  6.00%  Original Required  4.00% 2.00% 0.00% HSBC  RBS  Barclays  LBG  Sources: Published accounts, Capital IQ and Bank calculations (a) The red bars show the Tier 1 capital ratios that would have been required at end-2007 to fully absorb trading book write-downs and leave the bank with the Tier 1 capital ratio that was actually reported (blue bars). BIS central bankers’ speeches  13  Chart 5: Tier 1 capital ratios for “crisis” and “no crisis” banks 10.0% 9.0% 8.0% 7.0% 6.0% 'No crisis' banks 'Crisis' banks 8% threshold Lehman failure 15 Sep 08  5.0% 4.0% 3.0% 2.0% 1.0%  Nov 08  May 08  Nov 07  May 07  Nov 06  May 06  Nov 05  May 05  Nov 04  Nov 03  May 04  Nov 02  May 03  May 02  0.0%  Sources: Capital IQ and Bank calculations (a) “Crisis” banks are a set of major financial institutions which in autumn 2008 either failed, required government capital or were taken over in distressed circumstances. These are RBS, HBOS, Lloyds TSB, Bradford & Bingley, Alliance & Leicester, Citigroup, Washington Mutual, Wachovia, Merrill Lynch, Freddie Mac, Fannie Mae, Goldman Sachs, ING Group, Dexia and Commerzbank.

Ardian Fullani: Overview of Albania’s latest monetary and economic developments and outlook Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision of the Bank of Albania’s Supervisory Council, Tirana, 30 May 2014. *  *  *  Today, on 30 May 2014, the Supervisory Council of the Bank of Albania reviewed and approved the monthly Monetary Policy Report. After discussing the recent economic and monetary developments and their outlook, the Supervisory Council decided to lower the key interest rate by 0.25 percentage point, to 2.50%. The key rate decrease aims at creating more favourable conditions for inflation to return to our target in the medium term. The decision reflects our assessment and projections for low inflationary pressures in the quarters ahead, in response to the weak aggregate demand and the downward trend of inflation in Albania’s trading partners. This move contributes to boosting domestic consumption and investments, aiming at a fuller utilization of production capacities and a faster return of inflation to our target. (Let me now proceed with an overview of economic developments and key issues that were discussed at today’s meeting.) *** Annual inflation rate was 1.7% in April, slightly down from the average rate recorded in the first quarter of 2014. In the last months, the dynamics of inflation have been largely determined by the performance of food prices.
The Riksbank’s strategy has been to combine a marginally higher repo rate with communication that emphasises the fact that we perceive the development of high growth in credit and rising house prices to be worrying. The slightly higher repo rate does have some effect in itself, but perhaps its main function is as a concrete reminder of the risks, and it has thereby been an important part of the communication. In my opinion, this has had an impact, not least in increasing general awareness of the problems. The discussion of these questions now going on underlines that this has been the case. More extensive problem than just indebtedness After thus having responded to the first part of the first claim – that the Riksbank has leaned aggressively against the wind – I intend to move on to the second part, namely that the purpose of the policy of leaning against the wind has been to limit household debt. As I have pointed out, the element of leaning against the wind has not been particularly large, but has been there to some extent. However, it is too easy to say that this has only been aimed at getting households to borrow less, or as it is sometimes portrayed, that the Riksbank has a target as to how high debt may become in relation to income, for example. Even though developments in household debts are definitely an important part of the problem, the picture is much more complex.

Finance has both these raw ingredients. Most traders’ brains harbour the impatience gene. Often, they harbour little else. And traders’ behaviour is shaped every bit as much by the footfall of their friends in the herd. So, in theory, we might expect similar cycles of selfdestruction and self-improvement in finance. Gresham’s law in finance To illustrate these theoretical dynamics in action, consider a sketch model. Imagine three classes of investor:   an impatient short-term speculator, who follows the momentum of the herd, buying when prices are rising and selling when they fall;    a patient long-term investor, who invests according to where prices are relative to their long-term fundamentals;    an untested investor, who can mimic either the speculator or the long-term investor, but whose performance either way is assessed at frequent intervals by endinvestors who withdraw or maintain funds accordingly. Market prices in this model are buffeted by two winds. Momentum-based speculators cause deviations from fundamentals, while long-term investors drive prices back towards fundamentals. These are the double-selves of the financial brain, the patience and impatience genes. And as in social systems, the balance of these two genetic types results in two very different evolutionary equilibria. Under one equilibrium, patience wins the day. When long-term investors start in the ascendency, prices tend to correct towards fundamentals. The performance of untested investors pursuing momentum strategies falters, while those pursuing long-term strategies flourish. The fraction of long-term investors rises. The self-correcting tendencies of market prices are thus reinforced, further supporting long-term investors.
Hence the Committee has come to the view that, by and large, it is better to wait until the publication of the minutes when a fuller view of issues and views can be provided. That is not to say that press statements will not appear in future, but to stress that their purpose is limited to explaining a decision that might be unexpected, irrespective of whether that is a change or no change in rates. On the whole, the minutes have been successful in creating a wider understanding of the issues discussed by the MPC, and have a devoted, if small, following. The Inflation Report, which pre-dates the MPC, has a broader objective in setting out a comprehensive view of the current state of the economy, and describing the outlook for inflation in terms of a forecast over a two-year horizon. The Committee puts great weight on explaining the forecast in terms of probabilities. Hence it has adopted the famous coloured fan charts for its forecasts for both growth and inflation. But there remains some confusion about the role of the forecast. With the advent of the MPC, the tensions between explaining nine individual views and presenting a coherent account of the Committee’s view of the economy have complicated the production of the forecast. The Inflation Report now contains an explicit description of differences of view among the Committee in respect of both the central projection and the risks to the forecast, as well as the “best collective judgment”, or majority view, of the outlook.

However, suppose that, for some reason, the appropriate and effective instruments to ensure financial stability are not available, for instance, because of serious problems with the regulatory and supervisory framework that cannot be remedied in the short run. In such a second-best situation, if there is a threat to financial stability, one may argue that, to the extent that policy rates do have an impact on financial stability, that impact should be taken into consideration when choosing the policy-rate path to best stabilise inflation and resource utilisation. Such considerations could result in a lower or higher policy-rate path than otherwise, in order to trade off less effective stabilisation of inflation and resource utilisation for more financial stability 5. However, so far all of the evidence indicates that in normal times  5  Such considerations could include evidence of the “risk-taking channel” as in Borio and Zhu (2008). Adrian and Shin (forthcoming) and Adrian and Shin (2010) argue, in a model with such a risk-taking channel, that short interest-rate movements may have considerable effects on the leverage of securities broker-dealers in the market-based financial sector outside the commercial-banking sector. If we assume that the risk of a financial crisis increases as this leverage increases, and that policy rates affect leverage, then policy rates would affect the risk of a financial crisis (Woodford 2010b). However, new regulation is likely to limit excess leverage and limit the magnitude of these affects.
To achieve this, after raising interest rates to close to the "neutral interest rate" of 2% in December, we are now embarking on the second phase towards monetary stabilisation: ideally, it would be good to reach the right "terminal rate" by next summer, but it is still too early to say what that level will be. We need to remain pragmatic and to be guided by observed data, including on core inflation, without getting fixated on overly mechanical rate hikes. We will then be prepared to remain at this terminal rate for as long as necessary: the sprint to raise interest rates in 2022 is now becoming more of a long-distance race, and the duration will count at least as much as the level. In parallel, we shall continue to focus on maintaining financial stability, helped by the strong resilience of French banks and insurers. In Europe, 2023 needs to be the year when Basel III is transposed into EU law and the Solvency II review is completed. Regarding crypto-assets, the disruption seen in 2022 is nourishing one basic conviction: France should switch as soon as possible to the compulsory authorisation of DASPs (digital asset service providers) rather than simply requiring their registration. And this needs to happen well before MiCA enters into force, to create the necessary framework of trust. 2) Less protection and more adaptation. The government can cushion the energy shock temporarily, but it cannot make it disappear.

François Villeroy de Galhau: New Year wishes 2023 New Year wishes to the Paris financial centre by Mr François Villeroy de Galhau, Governor of the Bank of France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), Paris, 5 January 2023. *** Allow me to extend my warmest wishes for 2023 on behalf of the Banque de France and the ACPR. I don't know if I dare wish you, or wish us, a year free of shocks after those of 2020, 2021 and 2022. This past year has been marked by a climate of uncertainty, exacerbated by Russia's war in Ukraine and the energy crisis. It has also seen increased financial market volatility, compounded by the turmoil in the cryptoasset universe. In this unstable environment, I would like to make two double wishes for 2023: 1) Less inflation and more stabilisation. Activity has, until now, proved more resilient than expected, which is good news; however, inflation must not become entrenched. It is the number one concern for French people, and defeating it is our number one mission. It fell in December to 6.7%, which is encouraging but still not enough. It should peak in the first half, before declining towards 4% by the end of this year. But our forecast, and our commitment, is that inflation should be brought down towards 2% by end-2024 to end-2025.
The actual return on the Fund in 2001 will not be included in the calculations until the budget for 2003. Moreover, attempts shall be made to curb the impetus from particularly large fluctuations in the phasing-in rate implied by the main rule: “In the event of extraordinary, substantial changes in the Fund’s capital or in the structural, non-oil deficit from one year to the next, the change in the use of petroleum revenues must be distributed over several years based on an estimate of the size of the real return on the Fund a few years ahead” (Report no. 29 to the Storting 2000-2001, p. 7). This means that fiscal policy can still be used to stabilise economic developments. This is a sound Norwegian tradition, but may be demanding. At last year’s seminar, the Central Bank Governor stated: “In Norway it is important that the annual budgets are anchored in a long-term strategy which takes into account that oil revenues may fluctuate from one year to the next”. The guidelines satisfy the requirements of this long-term strategy. Consensus concerning the guidelines and adherence to them will create confidence in the long-term formulation of fiscal policy. This also provides a stable framework for monetary policy. Under such conditions, the effect of monetary policy instruments will be more predictable. The uncertainty facing economic agents is reduced through the establishment of credible fiscal policy guidelines. A stable operating environment is an important precondition when decisions that have long-term consequences shall be taken.

There has also been a recent shift in opinions coming out of academic research, from a broad resistance to taking financial stability into account when shaping monetary policy19 to greater openness to the view that there may be good reasons for doing so.20 Even before the financial crisis hit Europe and Swedish with full force in autumn 2008, there were concerns in the Executive Board that the credit expansion was too rapid and that housing prices were increasing too quickly so that a bubble might build up, and later burst to cause a severe recession. This was not the case in Sweden, but did happen in the United States and several countries in Europe. During the crisis years 2009–2010 the endeavour was instead to use low interest rates and liquidity assistance to the banks to avoid a credit crunch that could intensify the crisis. And we succeeded well in this. During the entire period, the banks’ total lending to households and companies in Sweden increased (see Figure 11). Put greater emphasis on the initial situation and the forecasts for the coming year We should put greater emphasis on the initial position and the forecasts for the coming year than on the long-term forecasts. At the Riksbank, considerable resources are put into analysing the state of the economy. The statistics received are analysed and commented on regularly.
Importantly, SOFR proved to be resilient even during the market stress at the height of the pandemic last spring and will provide a rock-solid foundation for the post-LIBOR world.3 The final comment I’ll add on this topic is that while much progress has been made in the transition away from LIBOR, time is running out, and your transition from LIBOR should happen as soon as practically possible. This is not something to leave until the last minute. Economic Outlook OK, enough on LIBOR, at least for today. I’ll now turn to the theme of the economic outlook and where I see us on the path to a full recovery. Let me begin by saying that we’ve come a long way since the darkest days of the pandemic, and I expect even brighter days ahead—and I don’t just mean that because it is finally summertime. 1/3  BIS central bankers' speeches  We find ourselves at an extraordinary juncture in the recovery. Thanks to widespread vaccinations and robust support from fiscal policy, the economy is reopening more quickly and more strongly than expected. When it comes to the economy, it’s getting better all the time. The rapid rebound is excellent news—it means more jobs and a brighter future. But, it also means that we are seeing strains as businesses try to keep up with the rapid acceleration in demand for their products. After sharp declines in employment, production, and prices last year, the opposite is now occurring.

Before I continue, let me give the usual disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or anyone else in the Federal Reserve System. The Final Countdown I’ve spoken about the LIBOR transition many times before,1 but the message bears repeating, especially now that we’re only about six months away from moving off of LIBOR, once and for all. During this critical time, it’s important to focus on building a strong and robust foundation for the future so that we never have to go through a transition like this one again. That’s why when it comes to choosing a LIBOR replacement, you need to be confident that the rate you use is appropriate and will hold up even under stress. At the Financial Stability Oversight Committee (FSOC) meeting earlier this month, FSOC members highlighted risks around reference rates that share many of LIBOR’s shortcomings, such as being based on thinly-traded markets.2 The Alternative Reference Rates Committee (ARRC) studied this issue carefully and consulted thoroughly with the public, and recommended the Secured Overnight Financing Rate (SOFR) as the main U.S. dollar reference rate for the post-LIBOR world.