samchain/econo-pairs-v1 huggingface dataset:
It also explains the effects that monetary policy is having on the economy and how that's helping to bring inflation back down. During the pandemic and its aftermath, we saw an enormous swing in demand, away from services like travel and entertainment and toward goods and housing, as people adjusted to work from home and avoided contact-intensive activities. More recently, we are seeing a rotation in demand from goods back into services. But through all these shifts, overall demand has remained very strong and has far exceeded supply. This misalignment of supply and demand is true for the labor market as well. Although several indicators of labor demand-such as job openings, quits, and hiring-have stepped down from their very high levels of the first few months of 2022, they show that demand still far exceeds available supply. And the unemployment rate of 3.5 percent is historically low. The same dynamics play out in the Federal Reserve's Second District, the region that the New York Fed represents. Our regional business surveys indicate that activity is slowing, with an especially sharp decline in the manufacturing sector. That said, many businesses continue to add staff, and consumer confidence is strong. Overall, inflationary pressures in the region are moving downward, but are still quite high. Gears Are Turning With inflation running persistently above its longer-run goal of 2 percent, the FOMC has taken strong actions to align demand with supply in the economy and bring inflation down.

Christian Noyer: Conducting monetary policy in times of financial stress Speech by Mr Christian Noyer, Governor of the Bank of France, at the European Banking and Financial Forum, Prague, 1 April 2008. *  *  *  For more than two centuries, preserving the value of money and fostering the stability of payment systems and credit and financial markets have been the two main responsibilities of central banks around the world. Under normal circumstances, we tend to think of these tasks as relatively distinct. Furthermore, this practical dichotomy broadly reflects the academic state of the art: as Professor Goodhart recently stressed, the large consensus on the macroeconomic policy side of central banking that has emerged over the last two decades contrasts with the absence of consensus on the appropriate theoretical framework for analysing financial stability and the best ways of ensuring it or restoring it when it breaks down.1 However, in times of stress, some interactions inevitably emerge. For instance, the financial turmoil has a clear impact on the effectiveness of monetary policy transmission (see for example the unusually large spreads on the money markets since August 2007). Conversely, adequate monetary policy decisions and credible communication should contribute to the orderly unwinding of financial crises. Periods of turmoil, like the one we are now experiencing, are thus clearly challenging, since we have to rethink the way in which we can meet both of our responsibilities. I will first address the issue of the necessary separation of liquidity management and monetary policy decisions.
Although the size of the market may seem modest by global standards, the sukuk market has been registering an impressive average growth of 40 per cent per annum. The phenomenal demand has been spurred by the high levels of surplus savings and reserves in Asia and Gulf regions. Asia has a savings rate which is higher than any other region in the world and is expected to remain between 30 and 40 per cent of GDP for many years to come. The sukuk market brings with it many benefits to both issuers and investors. Issuers can benefit from the huge increase in liquidity in the Islamic world, and can tap on these new sources of funds. Raising funding from the Islamic bond market in the current environment has been 10 to 20 basis points lower than mainstream bonds. An increased number of multilateral agencies are issuing sukuks to finance development projects. In addition, both government agencies and the corporate sector have considered the sukuk market as an attractive source of financing. From the investor perspective, there are the benefits of diversification. In a sukuk issue in 2005, 48 per cent of the issuance were subscribed by conventional-based investors. This increased appetite for sukuk reinforced by excess liquidity in the global financial system is part of the reasons sukuks are attractively priced for issuers. Extending the linkages to other parts of the world The emergence of Islamic financial products, in particular, in the capital market has also promoted greater global financial integration.

In the Malaysian sukuk market, Islamic private debt securities now account for 50 per cent of the total private debt securities market. Another challenge to the growth of the market concerns pricing issues. For the Islamic security to be efficiently priced and credible, further initiatives need to be undertaken to develop its own indicator. For example, if a sukuk is issued based on the Ijarah principle, and uses the property as its underlying asset, the actual rate of rental may be explored to be used to determine the rate of return on the instrument. It would then fluctuate depending on the demand and supply for that property. It will then give a true reflection of the price of the underlying asset. Shariah experts, who have a full understanding of the mechanics of sukuk, are key to ensuring its proper governance. And shariah decisions, when made, should be transparent and disclosed. This will allow others to appreciate the juristic reasoning, which in turn should lead to wider acceptance of shariah decisions, particularly if they have implications on cross-border transactions. In relation to this, a guide for issuers and investors to refer with regards to shariah decisions would facilitate the development of the market. Of further importance is the attainment of the convergence of Shariah principles and interpretation to ensure market confidence among investors from different parts of the world. To achieve this, there needs to be continuous investments in intellectual capital and greater engagement among Shariah scholars.
During the first lockdown, for example, there may have been a greater share of consumption that was effectively considered “risky” than in the more recent episodes4. Consumers may also have learned over time how to adapt to these restrictions a little more. But I think there are still a few things in the empirical data that are worth picking out. First, I think there clearly was a fair amount of expenditure switching through this year. A pound less spent on risky activities like going to restaurants or concerts has not meant a pound less in aggregate. This is most obvious in cases where there are relatively close substitutes for the things people have been unable to do. For example, the surge in retail spending we saw at the start of this talk has occurred despite a big drop in sales at physical shops. That has been more than made up for by a big rise in online purchases (Chart 6). Similarly, the inability to go out in people’s free time has probably contributed to a strong rise in spending on audio-visual equipment, as they instead try to improve their leisure time at home. More generally, and as we saw at the start, goods spending has been much stronger than spending on services – and also stronger than the average rate of growth over the past and that of household income.

By the same token, none of this means that, over the medium term, economic risk won’t continue to affect consumers’ appetite for spending, as it’s always tended to in the past. If rates of unemployment were to remain relatively high even two or three years from now, it’s likely the saving rate will also be above average. But I do think it’s these more conventional factors – economic risk rather than pandemic risk – that we should have in mind when thinking about what might happen to saving and consumption over the medium term. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Indeed I think this would be true even without taking into account the likely improvements in health treatments (the new vaccines, for example). The consequences for supply and costs  A market economy is a dynamic place. Adapting to economic conditions, meeting changes in consumer tastes and adopting new production methods – this is what it’s meant to do. And underneath the macroeconomic surface, there is always a significant degree of churn of this sort. Even in normal times jobs are destroyed and created all the time, buildings re-purposed and new techniques learned. Most of the time, as macro-economists, we can safely ignore these things (we certainly tend to). We assume that aggregate quantities are determined only by other aggregates – potential output depends only on total capital and labour, for example, and inflation only on some whole-economy version of spare capacity.
We cannot forget that, as the memories of the crisis fade, the political pressure to undertake reforms also tends to wane. Thank you. 8  https://nextcmu.eu/wp-content/uploads/2019/10/The-Next-CMU-HL_DO.pdf The report also suggests re-naming the project “Savings and Sustainable Investment Union", which emphasises the role of funding in promoting the transition to a more sustainable economy. 9  10/10

In 2004, we issued three new licences to foreign Islamic financial institutions. In 2005, Islamic windows of the conventional banks were encouraged to be transformed into Islamic subsidiaries that allowed foreign equity participation of up to 49%. The foreign exchange administration rules were also liberalised to allow foreign corporations and agencies to issue ringgit sukuk in Malaysia. In 2006, foreign tie-ups were encouraged – in the four new licences for takaful business that were issued. Following these developments, the MIFC was launched in 2006 to develop Malaysia as an international hub for Islamic finance. Under this initiative, new international Islamic banking and takaful players could be established in Malaysia to conduct business in foreign currency. In 2007, foreign entities were permitted to issue non-ringgit sukuk from the Malaysian market. Foreign entities could also operate Islamic fund management activities here. Early this year, the announcement was made that up to two mega Islamic banking licences with up to 100% foreign ownership would be issued to conduct international business. These initiatives cumulatively have internationalised our Islamic financial system in terms of the presence of foreign players and in terms of participation in our financial system. The Commodity Murabahah House, or the CMH, that is being established today will be an important platform that will further enhance global interlinkages in the international Islamic financial system. The CMH is designed to be a multi-currency and multi-commodity exchange-traded platform to facilitate the trading and settlement of commodity which acts as the underlying transaction for liquidity management between Islamic financial centres.
In the non-bank financial subsector, growth of nonbank financial institutions offering bank-like products has also tremendously increased. As at end June 2010 there were 24 registered microfinance institutions while the number of leasing firms also increased to 12 over the years. Ladies and Gentlemen, apart from increasing the number of financial service providers, we have also scored some successes in the availability of credit to Zambians. In the period prior  BIS Review 105/2010  1  to the 2008 global financial crisis, the economy was experiencing not only phenomenal growth in credit availability but also a changing pattern in the distribution of credit. Annual growth in credit peaked and averaged 131% between 2000 and 2008 before succumbing to the adverse effects of the global economic crisis. With regard to the direction of credit, it is heartening to note that bank loans, which have been largely a preserve of corporate businesses for a long time, are finally within reach of our many working Zambian individuals. Ladies and Gentlemen, the flow of credit to individual workers has literally exploded in recent years. You may wish to know that personal loans, which stood at a paltry 6% of total bank loans at the turn of this decade now account for 26%. You may also remember the aggressive manner in which commercial banks rolled out their loan products in the period prior to the 2008 global financial crisis.

On 15 January, the Swiss Franc moved by more than 30 standard deviations. For rough scale, an 8 standard deviation move should happen once every three billion years or so for normally distributed data. You may at this point recall the saying popularised by Mark Twain, about “lies, damned lies and statistics”. I think I can be reasonably confident in saying that the fact of these events happening does not mean that we should expect low volatility in financial markets for at least the next three billion years. I am not going to spend time discussing the causes of these events; suffice to say that there was news of an unexpected sort, and the size of the resulting moves points to greater sensitivity in the response of markets. The ability of markets to trade without triggering major price moves was limited. That said, by the end of both days, volatility had reduced, prices had retraced a portion of their peak intra-day moves and liquidity returned. This quick stabilisation helped to limit contagion to other markets, and thus wider effects on the stability of the financial system. Should we therefore be concerned? My answer to that is we should certainly be keenly interested. I agree with the conclusion of the Federal Reserve Bank of New York that understanding the manner in which the evolving market structure is affecting market liquidity, efficiency and pricing is highly important (Potter (2015)).
Companies comment to us that the time and resources needed to win new business and secure contracts has increased sharply in the face of weak demand.7 I’m sure that these mechanisms and many more like them are at work today. But are they sufficiently strong for us to be confident that the likely relationship between growth and inflation would be unusually favourable were demand to increase strongly? Why should these mechanisms be so much more pronounced now than in previous recessions? Wouldn’t most of them have seemed equally important in the past? I find it hard to believe that these types of effects are the entire – or even the main – explanation for the weakness in productivity. What is unusual about this downturn is that it has been associated with a severe and prolonged financial crisis. Several of our banks are still not in a position to lend normally. Many firms have had to economise on working capital as the cost has increased and the availability reduced. The ability of many SMEs to raise finance to fund new investments or business expansion has been constrained. The efficiency with which banks have been able (or willing) to reallocate funds from outdated businesses and sectors towards new and dynamic companies has been stunted.

5  King (2012) and Tucker (2012) make similar arguments in the context of financial stability and the role that the newly formed Financial Policy Committee can play in this respect. 4  BIS central bankers’ speeches  The second possibility is that the effective capacity of the economy to supply goods and services depends on the state of demand: the stronger the demand, the greater somehow the capacity of companies and employees to meet it. The likely responsiveness of supply to an increase in demand, it’s argued, means that it would be possible for the economy to grow relatively rapidly without significantly reducing the degree of slack in the economy and so without adding markedly to cost and price pressures. Let’s consider briefly each of these possibilities in turn. The suggestion that the Phillips curve may be relatively flat appears, at least at first blush, to be consistent with our experience over recent years. Following the worst recession in living memory, our economy has barely grown over the past two years. Output is well below its pre-crisis level, unemployment close to 8%. But inflation remains stubbornly above target. The trade-off between output and inflation has indeed been remarkably flat. But that doesn’t mean that the flatness of this trade-off can be relied upon to continue in the future: it depends on why inflation has been so sticky. Much of the slack in our economy is concentrated in the labour market, where unemployment remains painfully elevated.
While additional study of the effects of large-scale asset purchase (LSAP) programs should be encouraged—as it furthers our understanding of the use of these unconventional monetary policy tools—the paper’s findings do not, in my mind, invalidate the use of LSAPs when the Federal Reserve is operating at or close to the zero lower bound for shortterm interest rates. That is the key issue—not the magnitude of the effects of LSAPs or whether short-term interest rates should be the primary tool of monetary policy. On the latter point, which is consistent with the FOMC’s statements about policy normalization, I see broad agreement. Concluding that LSAPs are less powerful than suggested by some of the estimates from the event study literature does not imply that there is no role for LSAPs at the zero lower bound. In such circumstances, LSAPs can be used to provide additional monetary accommodation by depressing bond term premia and the spread between agency mortgage-backed securities (MBS) and Treasury securities, as well as by strengthening the credibility of forward guidance on the path of short-term interest rates. This can provide support to asset values more generally and make financial conditions more accommodative. Thus, discarding such a tool or ruling out its use seems counterproductive for two reasons. First, to the extent that such a tool can provide accommodation, ruling out its use would raise the risks of insufficient monetary policy accommodation when interest rates are pinned at the zero lower bound. Second, expectations matter.

These include potential selection bias of the events chosen and the fact that event studies may not capture all the factors that influence how market prices respond to LSAP announcements. The first problem with event studies, of course, is the issue of how much new information is revealed by the actual policy announcement. I would argue that LSAPs were always a possibility, so the probability of their use never went from 0% to 100%, even for the first LSAP program. This suggests that event studies could lead to downwardly biased estimates of the impact of LSAPs. In fact, if the announcement indicated that the program was smaller than expected, then bond yields could rise on the program’s announcement. This scenario could occur even though the overall program—including its anticipation—was effective in reducing yields. This makes interpreting the direction of changes in bond yields on the day of an announcement difficult. The second problem with event studies is that there are always other things going on. When the Fed announces an LSAP program, long-term rates might drop because of the announcement, or because market participants were revising downward their views about the state of the economy and the economic outlook in light of the Fed’s actions. Or, conversely, long-term yields could conceivably even rise as market participants became more confident that the policy actions would be sufficient to push the economy toward the central bank’s goals of maximum sustainable employment and price stability.
5  Eg, public interest pre-conditions for the use of resolution tools; compensation if creditors bear losses beyond what it is estimated they would incur in insolvency; an independent process for valuing potential compensation, etc. BIS central bankers’ speeches  3  The critical difference from a standard corporate reconstruction is that for banks and dealers there is not time for a negotiation lasting a month or so under the control of a judge. In the wider public interest, swifter action is needed to stabilise banks, executing a resolution strategy designed to contain the impact on stability in the financial system as a whole. Bailin seeks to deliver that. Such bailins do, of course, impose losses on creditors. But all – I repeat, all – resolution tools involve creditors and the Deposit Guarantee Scheme, as well as equity holders, taking losses. As this audience certainly knows, that is not an exotic proposition. The losses simply have to go somewhere. There is, however, a difference between ‘bailin’ and other resolution tools. Under most traditional bank-resolution techniques – L&P or P&A – losses for uninsured creditors , including the DGS, are revealed only at the end of the administration of the rump, when all assets have been sold or run off. ‘Bailin’ works by making an ex ante, up-front judgment of the scale of expected losses, and by reconstructing the capital structure accordingly, without the destruction of value entailed by winding down all portfolios associated with non-critical services.

Rather, it affects the exposure to loss of the DGS and thus the share of the losses having to be covered by the surviving parts of the industry.11 Amongst uninsured creditors, the position of bond holders will depend on whether they are issued from a (pure) holding company, in which case they have a structurally subordinated claim on the underlying business assets, or by operating companies that also have lots of other unsecured creditors. The exposure to loss of bonds issued by operating companies are, therefore, affected by whether or not they incorporate subordination clauses. For every bank group, all of that will be clear. The big issue, therefore, is about uninsured deposits. Should they rank alongside senior unsecured bonds or should they be preferred? In the US, all deposits are preferred. There is now an active debate in the EU about whether or not it should introduce depositor preference and, if so, whether that should be for all or only some uninsured deposits? Whatever the conclusion reached by the political authorities, it is important that the creditor hierarchy is the same under bailin, other resolution tools, and liquidation. Otherwise, pricing each piece of debt would depend upon time-varying assessments of the probabilities of the various resolution tools being applied in the event of a firm’s bankruptcy. On the substance of the issue, I can see a case for both insured and some uninsured depositors being preferred.