samchain/econo-pairs-v1 huggingface dataset:
We should certainly be wary of drawing overly direct conclusions from the Covid pandemic, given how truly unique the circumstances have been. But many of the vulnerabilities in financial markets exposed last Spring have been staring us in the face for some time – and will only grow in importance in the years ahead, as households and firms come to rely ever more closely on such markets to care for their savings, and fund investment. So we must seize this opportunity for reform. The primary focus lies in strengthening the resilience of those active in financial markets, through the vital work underway at the Financial Stability Board. Prevention is better than cure. But central bank tools have a part to play too. I have discussed here today some of the design features that a new generation of such tools might have. I look forward to the debate to come. Thank you. 24  https://www.brookings.edu/research/enhancing-liquidity-of-the-u-s-treasury-market-under-stress/  13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13

Many countries have had to reallocate budgets, issue debt, or rely on foreign aid to finance immediate relief and reconstruction efforts. Most have yet to develop robust public disaster risk financing strategies using ex-ante risk financing solutions, which includes setting aside reserves, establishing contingent credit, and tapping on insurance and capital markets. 8. Several ASEAN countries, however, have made significant strides in the right direction. For instance, Philippines has put in place a disaster risk management strategy since 2010, and implemented a parametric insurance programme covering 25 provinces, which will provide rapid liquidity for the government to enable rebuilding and recovery efforts when disaster strikes. It is now working with the World Bank on a sovereign catastrophe bond to complement the insurance programme, which will provide cover for more extreme events. Over the years, Indonesia has consistently increased its budget allocation for disaster management. Most recently, Indonesia has adopted a new disaster risk financing and insurance strategy, which encompasses the government insuring government buildings from this year. A Coordinated approach to Disaster Risk Financing 9.
Ingimundur Friðriksson: Monetary policy and the current monetary situation Address by Mr Ingimundur Friðriksson, Governor of the Central Bank of Iceland, to a civic club meeting in Reykjavík, 26 February 2003. *  *  *  The framework for monetary policy in Iceland was altered decisively in March 2001. The government and the Central Bank issued a joint declaration adopting inflation targeting as the mainstay of monetary policy and abandoning the fixed exchange rate policy which had been followed for just over a decade. To begin with, a relatively narrow target band was set in the previous regime for the reference exchange rate of 2¼% in either direction around the central value for the króna. This was widened in two stages, to end up as a 9% deviation in either direction early in 2000. During this period, price stability was the principal objective of monetary policy and a stable exchange rate was an intermediate target. Since the adoption of inflation targeting, the Central Bank’s inflation forecast could be said to have actually served as an intermediate target of monetary policy, with the ultimate objective price stability. Inflation targeting has established itself in many countries in recent years and has formed the backbone of monetary policy, for instance, in the UK, Sweden, Norway and New Zealand, with good results in each case. In May of 2001 the Icelandic parliament Althingi unanimously adopted a new Central Bank Act, which entailed extensive changes from the previous legislation.

The Bank intervened in particular when a downward spiral seemed to be forming, or when the Bank felt that its intervention could have a positive effect in changing market expectations. This was based in part on the Bank’s conclusion that the exchange rate had already dropped more than was reconcilable with long-term equilibrium in the economy. The Central Bank expended substantial sums in intervening on the foreign exchange market, over ISK 40 billion in total, without this sufficing to halt the slide of the króna. At best, it may have slowed the depreciation until the economy had cooled somewhat, and it also contributed to making the inflationary impact of the exchange rate drop less than it would otherwise have been. An article by Gerður Ísberg and Þórarinn G. Pétursson in this February’s issue of the Central Bank’s Monetary Bulletin describes the Bank’s actions on the foreign exchange market during 2000 and 2001 and assesses their impact. The article concludes definitively that at best the intervention had only short-term effect in each case and the market soon returned to its previous situation. In other words, their conclusion is that intervention on the foreign exchange market against strong prevailing currents has precious little effect unless accompanied by corresponding changes in the domestic interest rates. This is in full accord with the experience in other countries.
As already noted in contrast to the benefits, some costs have a contingent character. They are tail-events – rather unlikely but with a possibly high impact if they occur. Let me focus on two issues: •  asymmetric shocks,  •  arising micro- and macroeconomic imbalances. Shocks are by definition something we cannot foresee. Asymmetric shocks are shocks that affect only selected member(s) of a monetary union. Such events are considered the biggest threat to unions (Mundell 1961), because joining a common currency area substantially reduces the set of policy tools which could be used to mitigate the impact of the shock. Let us assume that a negative demand shock affects the Polish economy (e.g. consumers decide to buy less Polish goods and services). In the short and medium run, this brings about a reduction in output and higher unemployment. As long as Poland has its own currency, it can use both monetary and fiscal policy to stimulate demand and reduce the impact of the shock on output and employment. Moreover, the exchange rate might adjust (depreciate) and thus make our exports more price-competitive. Once in the eurozone, two of these  2  BIS Review 67/2007  channels are closed. First, there is no independent domestic monetary policy which could lower interest rates, and one should not expect the ECB to react to a local shock. Second, after joining the monetary union, the Polish currency will be replaced with the euro, so the zloty/euro exchange rate adjustments will no longer be available.

Lower interest rates induce investment, thus strengthening the productive capacity of the economy and making higher output and consumption possible. We expect that in the case of Poland the interest rate adjustment after eurozone accession will reduce long-term rates by more than one percentage point. Any estimation of the exact impact on investment, output and consumption is subject to several assumptions. Nevertheless the NBP’s analyses show that an interest rate reduction will be the main source of benefits from joining the euro (Borowski 2003). Research shows that the elimination of the exchange rate fluctuations and the coordination of monetary policy within the euro zone have been the main driving forces behind the financial integration in Europe (Fratzscher 2001; Galati and Tsatsaronis 2001; European Commission 2002; ECB 2006). Integration, in turn, promotes competition in financial markets, leading to an improved efficiency in financial intermediaries and a reduction in the cost of their services. A single currency provides domestic companies with an access to more liquid and deeper financial markets, which not only drives down the cost of capital, but also allows better risk diversification. Therefore, apart from stimulating economic growth, development of financial market also reduces output fluctuations. Since empirical research indicates that countries with relatively less developed financial markets benefit the most from financial integration (Giannetti et al. 2002), we believe that Poland should be among the largest beneficiaries of this process (NBP 2004). The benefit we know the least about is related to trade creation.
It is also clear in a long time series like the one in Figure 1 that a sharp slowdown in the rate of inflation took place when the inflation target was introduced. The average rate of inflation  is provided by Jonung, L., “Thirty years on the road to a more stable Sweden”, Knut Wicksell Centre for Financial Studies Policy Paper 2015:1. 6  See “Monetary policy under a floating exchange rate”, Sveriges Riksbank, 1992. 7  The target would formally apply with effect from 1995. 8  See Kydland, F. and E. Prescott, “Rules Rather Than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy 85, 1977, Barro, R.J. and Gordon, D., “A Positive Theory of Monetary Policy in a Natural Rate Model”, Journal of Political Economy, 91, 1983 and Rogoff, K., “The Optimal Degree of Commitment to an Intermediate Monetary Target”, Quarterly Journal of Economics, 1985. 9  This was also emphasised in the Commission of Enquiry on the Riksbank 1993, see “The Riksbank and price stability”, SOU 1993:20. 4  BIS central bankers’ speeches  has been fairly close to the target of 2 per cent. 10 Although several factors in addition to monetary policy have contributed to the low inflation, such as productivity development, stable public finances and improved wage formation, I would certainly claim firmly that the inflation target has functioned largely as intended.

Mugur Isărescu: Nine lessons from the current financial crisis Speech by Dr Mugur Isărescu, Governor of the National Bank of Romania and Member of the Romanian Academy, during the session titled “What lessons can be learned from the current economic crisis?”, organised by the Economics, Legal and Sociology Department within the Romanian Academy, in co-operation with "Costin C. Kiritescu" National Institute of Economic Research and the ”ESEN Reflection Group” Romanian National Committee, Romanian Academy, Bucharest, 14 April 2009. *  *  *  Your Excellency, Mr. President of the Romanian Academy, Dear colleagues, Ladies and gentlemen, I have recently talked about the causes of the current financial crisis and the manner in which it affects the Romanian economy at Babeş Bolyai University in Cluj-Napoca and Transilvania University in Braşov. Let me just recall here that the current crisis on the US subprime mortgage market was only the trigger of the global financial crisis. Its root causes were both macroeconomic and microeconomic in nature. Plentiful liquidity was the catalyst for the merging of multiple microeconomic causes such as securitisation, financial deleveraging, rifts in the business model of rating agencies and excessive deregulation, which resulted in today's financial crisis. World economies are hit by this crisis to various extents, depending on the vulnerabilities of each and their exposure to toxic assets. The response to the crisis is contingent upon the fundamental principles we believe in, the available resources, the institutions and the instruments we can make use of.
On top of these, there are the restrictions in the mobility of factors of production, notably labour and capital, with the asymmetry in capital mobility between the Mainland and Hong Kong presenting the most obvious obstacle. These restrictions may well be there for good reasons, but they do not mean that the development of a working relationship that is beneficial to both financial systems and to the country as a whole can just be left to market forces. There is a clear case for the involvement of the authorities responsible for these policy areas. To be sure, there have been notable co-operative efforts between the two financial systems, both between the authorities and between the private sectors of the two financial systems, and these have been quite obvious since the resumption of the exercise of sovereignty. These efforts have arisen simply out of need, particularly where the free play of market forces has been possible, and through the initiatives of the authorities concerned, where a common understanding can be arrived at concerning the common benefits that could flow from the removal of restrictions. But I think it is fair to say that the process has not always been a smooth one. Neither has the outcome been as productive as it could be, at least when assessed, narrowly some say, against the fundamental objective of making the two financial systems work together for their mutual benefits and in the best interests of the one country.

6  The five-pronged strategy was outlined in the speech that I delivered at the Financial Services Forum for delegations from Pan-Pearl River Delta Region in Hong Kong on 23 March 2006, and in the discussion paper prepared for the Economic Summit on "China's 11th Five-year Plan and the Development of Hong Kong" on 11 September 2006. 4  BIS Review 98/2006  Fourthly, enhancing the capability of the financial system of Hong Kong to handle financial transactions denominated in the RMB, with a view to facilitating in Hong Kong financial intermediation of the Mainland, the conduct of experiments in financial liberalisation and the management of the associated risks; and Fifthly, connecting the financial infrastructures (the payment, clearing, settlement and custodial systems) of the Mainland and Hong Kong, to facilitate the orderly flow of money and financial instruments across the two financial systems. We are now working hard on the specific proposals under each of these five strategic headings. These, together with other proposals from a market-specific perspective, will form quite a rich menu on what we, the financial system of Hong Kong, can do for the country and on the benefits the country can derive from the arrangement of “one country, two financial systems”. BIS Review 98/2006  5
As the FOMC noted in its most recent statement in late April, the Committee is looking for two conditions to be satisfied for the normalization of monetary policy to start: “further improvement in the labor market” and that the Committee “is reasonably confident” that inflation will return to the FOMC’s objective over the medium term. I think these are reasonable criteria. I would note that these criteria are not independent. All else equal, for example, further improvement in the labor market should make one more confident about the inflation outlook. But improvement in the labor market, while necessary, is not a sufficient condition. For example, if labor market improvement were not accompanied by a meaningful uptick in wage compensation and if inflation expectations also fell, then one likely would not be reasonably confident about inflation returning to 2 percent over the medium term. 3  4  The data on inflation compensation come from the Federal Reserve Board of Governors website at www.federalreserve.gov/econresdata/feds/2008/ and is based on Refet Gurkaynak, Brian Sack, and Jonathan Wright (2010), “The TIPS Yield Curve and Inflation Compensation,” American Economic Journal: Macroeconomics 2(1), 70–92. BIS central bankers’ speeches  For me, at present, the uncertainties rest more on the outlook of the labor market. If the labor market continues to improve and inflation expectations remain well-anchored, then I would expect – in the absence of some dark cloud gathering over the growth outlook – to support a decision to begin normalizing monetary policy later this year.

The policy strategies pursued need not be identical across countries and regions and the required size of the economic stimulus and the nature of the other measures taken need not – and should not – be the same, as structural and conjunctural conditions differ. Nevertheless, a similar orientation and consistency is warranted. 1  See International Monetary Fund, Global Financial Stability Report Market Update, 28 January 2009, p.2. 2  Based on data available up for January 2009. BIS Review 38/2009  1  Since the intensification of the financial crisis in September 2008, central banks and governments globally have acted in a decisive and concerted manner to contain the adverse effect of the financial crisis on the real economy and promote its recovery. In the euro area, the actions taken by the ECB and the Eurosystem are unprecedented in size and scope. Government support for financial institutions in the form of recapitalisations, guarantees on bank debt and, more recently, asset relief schemes, have been significant and the pertinent measures are progressively being implemented. And the fiscal stimulus packages of euro area governments are substantial, amounting to a total of about 2% of euro area GDP over this year and the next. The immediate priority of macroeconomic policies and bank support schemes is to promote the economy’s recovery and preserve price and financial stability.
But we are also mindful not to fall into the trap of data-mined quantitative strategies that rely on factors that may not be robust through time. Conclusion In Singapore, reserve management is a multi-objective, multi-agency, and most importantly, a multi-generational effort. The reserves serve as a buffer against bad times, as an endowment to finance current needs, and as a foundation for macroeconomic stability. As custodians of the national reserves, MAS, GIC, and Temasek owe a duty of care and responsibility to the ultimate beneficiaries of the reserves - current and future generations of Singaporeans. It is a duty that motivates our investment and risk managers as they go about their work 6/7  BIS central bankers' speeches  each day, trying to extract value while staying clear of pitfalls, amidst the turbulence, tides and ebbs of financial markets. Thank you. 7/7  BIS central bankers' speeches

Self-regulation doesn’t work if there is no clear and consistent allocation of responsibility for the public interest objectives of financial regulation to public bodies that are answerable to the government and to parliament. But likewise, public bodies cannot seek to take on the responsibility of managing within firms, something that has to be the responsibility of boards and management. The senior managers and certification regime is vital here because it creates the framework to establish effective responsibility within firms, while maintaining the role of the public authorities, the PRA and FCA, for supervising and enforcing the public interest. A very good example of how this should work can be seen in the recommendations of the Fair and Effective Markets Review, which provide a means to establish and maintain high conduct standards in financial markets. Structural reform I want now to turn to structural reform and ring fencing. This is a subject in its own right, but I can assure you that I intend to be brief on this one tonight. We are now well into implementation. Last week we issued our second consultation paper on implementing the regime, and we plan one more such paper which will be more in the form of a wrap up of points raised and a few outstanding actions. Any structural reform measure involves complex implementation, the devil is always in the detail, and we need to get that right. I read from time to time that we are apparently watering the regime down via the implementation.
Many micro enterprises fail within the first few years of operation, if the producers do not pay heed to this vital requirement. The distancing of the project management from the selection of business line is a well thought out process, because it forces the beneficiaries to make business decisions and take responsibility for same. To build their capacity to make these decisions, training was provided as to how they should conduct simple and quick market surveys and how they could satisfy the quality requirements expected by their customers. After the beneficiaries have selected their business projects, they are referred to the relevant regional development bank for funding support. In view of the speciality and complexity of the loan objectives, micro loans are granted to beneficiaries on the strength of a mutual guarantee or an interse guarantee. If any member of a group defaults the loan, other members of the group are called upon to repay the loan. This ensures credit discipline and compels the members of the group to be constantly alert and vigilant on how a member of a group is using the funds lent to him, because if he defaults, the other members have to bear the burden of repaying the loan of the defaulting member. The peer pressure exercised by members on each other is a better loan management and monitoring system than what the mainstream bankers usually do through their branch network and local staff.

6  7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  A related point is that not all reductions in uncertainty are beneficial. In particular, guaranteeing what firms themselves see as the worst case outcome (in the simple model that would mean setting q = λ = 1) is unlikely to improve matters even if it “resolves the uncertainty”. Quite the opposite: it would mean only that projects that have so far been postponed, precisely for fear of such an outcome, would then be cancelled for good. Another set of implications arises from the expected duration of the uncertainty (E[T] = 1/q). It’s helpful in this respect to re-express [2] as follows: E[T] (R – ρ) ≥ λL  [3]  Writing the result this way makes its interpretation that much more intuitive. On the right-hand side is the benefit of waiting until the event is realised, i.e. the (probability-weighted) loss the firm could thereby avoid. On the left-hand side is the cost of waiting, namely the excess return the investment would earn in the meantime. And the longer the wait (the higher the expected duration of the uncertainty E[T]) the greater the foregone income is likely to be. If the firm expects a really long delay before the news comes through (high E[T], low q) it might well decide it just has to get on with things and make the investment anyway.