samchain/econo-pairs-v1 huggingface dataset:
The tendency to leak will of course be higher the greater the tension is between the policy rate and the shadow interest rate that ensues from the regulations and the longer the interest rate differential lasts. 3 [21]  economy and how great the cost is of the crisis that is possibly avoided or mitigated. To investigate this, theoretical models and simulations in quantified models have been used. 8 It is perhaps not particularly surprising that whether it is considered a good or a bad idea to use monetary policy to counteract financial imbalances largely depends on the assumptions made and how the model is designed. My interpretation of the literature is that it is not leaning clearly in either direction. 9 Taking a step away from the research literature, what does it look like in practice? As academic research has not come to any clear conclusion, it is perhaps not so surprising that central banks have slightly different opinions. Many central banks, for example the US Federal Reserve, seem sceptical to using the policy rate to counteract financial imbalances, other than possibly as an absolutely last resort, if nothing else proves effective. 10 But there are also central banks that have made a “leaning against the wind” policy into an integrated part of the monetary policy set-up. Perhaps the clearest current example is Norges Bank. Norges Bank’s remit refers, on the one hand, to regulations and the supervision of financial institutions being the most important means of preventing shocks in the financial system.

Mario Draghi: ECB press conference - introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Luis de Guindos, Vice-President of the European Central Bank, Frankfurt am Main, 7 March 2019. * * * Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis. Based on our regular economic and monetary analyses, we have conducted a thorough assessment of the economic and inflation outlook, also taking into account the latest staff macroeconomic projections for the euro area. As a result, the Governing Council took the following decisions in the pursuit of its price stability objective. First, we decided to keep the key ECB interest rates unchanged. We now expect them to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. Second, we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when we start raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
But our view of inflation prospects and what they entail for the repo rate had not changed to any great extent in February compared with the previous monetary policy meeting in December 2006. We also expressed this attitude in speeches given in the weeks prior to the February meeting. When we presented our own interest rate forecast for the first time in February some analysts showed considerable surprise. Using our own interest rate forecast enables us to explain more fully how we viewed developments in the Swedish economy during the forecast period, and what demands this made of monetary policy. Our assessment was that cost pressures in the Swedish economy would not be overly high. Productivity has been high in recent years and is one important reason why inflationary pressures have been low. We were assuming that productivity would increase slightly more slowly when employment began to pick up and that wage increases would be slightly higher as it became more difficult for firms to recruit employees with the right competence. But inflation was still low and although the forecast was based on cost and inflationary pressures rising during the forecast period, our assessment was that this would occur at a moderate pace. We therefore concluded that it would be sufficient to have a fairly limited raise in the repo rate in the future. But to emphasise that forecasts are uncertain, we also published uncertainty bands for the repo rate and for GDP growth and inflation.

Equity and derivatives exchanges are consolidating globally in the bid to establish greater market share and to expand product offerings. The New York Stock Exchange-EURONEXT cross-Atlantic merger to create the first multi-time-zone exchange, and the recently announced merger between the Chicago Board of Trade and the Chicago Mercantile Exchange could lead to more centralized liquidity pool for derivatives trading in the US and Europe. Asian exchanges can do more - TSE can take greater leading role The consolidation trend has yet to reach Asia and Asian exchanges may face the risk of marginalisation. In order to remain relevant, the Asian exchanges may need to explore ways to deepen collaboration and product differentiation in the face of strong competition. In Asia, the Tokyo Stock Exchange is the largest stock exchange by market capitalization. Since its establishment in 1878, it has grown to be the 2nd largest bourse globally, with a market capitalization of its listed companies exceeding $ trillion, second only to the New York Stock Exchange. It also registers high average daily trading volume for domestic equities of about $ billion for 2005. I understand that the Tokyo Stock Exchange is currently in talks with major exchanges about alliances and I am heartened to hear its efforts to work more closely with the Asian exchanges. For example, the Tokyo Stock Exchange and the Singapore Exchange have been discussing about such strategic cooperation which would benefit both markets and their investors, including the possible trading linkage, and I urge both parties to work together more closely.
Borrowers needed to sell assets to meet the calls; some highly leveraged firms were unable to meet their obligations and their counterparties responded by liquidating the collateral they held. This put downward pressure on asset prices and increased price volatility. Dealers raised margins further to compensate for heightened volatility and reduced liquidity. This, in turn, put more pressure on other leveraged investors. A self-reinforcing downward spiral of higher haircuts forced sales, lower prices, higher volatility and still lower prices. This dynamic poses a number of risks to the functioning of the financial system. It reduces the effectiveness of monetary policy, as the widening in spreads and risk premia worked to offset part of the reduction in the fed funds rate. Contagion spreads, transmitting waves of distress to other markets, from subprime to prime mortgages and even to agency mortgagebacked securities, to commercial mortgage-backed securities and to corporate bonds and loans. In the current situation, effects were felt in the municipal and student loan markets. The most important risk is systemic: if this dynamic continues unabated, the result would be a greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole. This is not theoretical risk, and it is not something that the market can solve on its own. It carries the risk of significant damage to economic activity.

It should be abundantly clear by now to any financial institution that is serious about VBI, that, the task of building the human and intellectual capital to achieve and sustain value-based business models cannot be left solely to the human resource departments. It requires nothing less than strategic direction and resourcing decisions at the highest levels of the organisation. Changing mindsets Einstein once said “The world as we have created is a process of our thinking. It cannot be changed without changing our thinking”. The world today continues to push the limits of social and environmental thresholds, that are posing increasingly serious threats to humanity. VBI is therefore, much more than a current and passing fad, but a deeper conviction of the critical need 3/4  BIS central bankers' speeches  to begin the process of changing mindsets in a lasting way. Financial institutions are a key, but not the only catalysts in this process. Customers and investors need to be supported with relevant information, along with the means and ability to compare such information, in order to better understand the value propositions of Islamic finance. The encouragement of pension and institutional funds with a sustainable investment orientation, particularly in markets where such funds remain largely underdeveloped, would be important to provide a stronger impetus for VBI. Credit rating agencies could also be important contributors to a new landscape, with stronger emphasis on economic, social and environmental sustainability in assessment frameworks and methods.
To be frank, the situation we sometimes faced as regulators in the past, where firms were unable quickly to tell us their asset exposures, and solvency reviews sometimes occurred 18 months in arrears, was unacceptable, particularly given the fast pace at which serious economic and financial crises can develop in the modern interconnected world. However, I keep an open mind about whether we have struck the right balance – there may be a case for lowering the burden, if it turns out that some of the new reporting doesn’t deliver supervisory benefits commensurate with its cost. We are also investigating the potential for publication of selected statistics to provide an overview for market participants. 2  http://www.bankofengland.co.uk/publications/Pages/speeches/2015/861.aspx CP47/16, issued December 2016, consultation closed 15 March 2017, http://www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4716.aspx 3  4  All speeches are available online at www.bankofengland.co.uk/speeches  4  On 16 November 2016, the Bank published its first edition of a new quarterly Statistical Release for the UK 4  banking sector . We are considering the potential for issuing something similar for the UK insurance sector, derived from the data insurers submit to us. We plan to engage with industry soon to discuss what format and content would be of most use and interest, with a first release potentially in the autumn. A third topic of rumbling discontent relates to how easy insurers find it to invest in illiquid assets, and then to receive appropriate regulatory recognition. In my view, there are two quite separate issues at play here.

Benito and Mumtaz (2009) estimate between 20–40% of UK households display such “excess sensitivity”. See Bachmann, R, Berg, T and Sims, E (2015), “Inflation expectations and readiness to spend: cross-sectional evidence”, American Economic Journal: Economic Policy, 7(1); Hori, M and Shimizutani, S (2005), “Price expectations and consumption under deflation: evidence from Japanese household survey data”, International Economics and Economic Policy, 2; Benito, A and Mumtaz, H (2009), “Excess sensitivity, liquidity constraints, and the collateral role of housing”, Macroeconomic Dynamics. BIS central bankers’ speeches  3  world, where private debt levels remain very high relative to history, including the UK (Chart 3). When a household takes out a mortgage or a firm secures a loan, the amount owed is denominated in cash terms – that is, not adjusted for inflation. Unexpected, generalised, and persistently falling prices then mean the real value of debt increases: the same amount of money is owed, but that money now buys more goods and services. As a result, more consumption or investment needs to be foregone to service the debt. This debt-deflation dynamic was at the core of the Great Depression7 and in the Japanese malaise following the collapse of the asset bubbles of the 1980s. It would be a particular concern if the pace of wage growth were to follow prices down. There is no evidence of that in the UK, where wage growth has picked up over the past six months.
Although the mix of tools and approaches has varied across the major economies, each has tried to provide a more effective form of liquidity insurance to its financial institutions by expanding the capacity of banks to borrow at longer maturities from the central banks against a broader range of collateral. The actions to address liquidity issues – those we announced this week and those that we have taken over the past five months – can help reinforce our monetary policy actions by providing greater assurance for market participants of access to funding. By allowing strong banks to borrow against collateral that they can no longer easily finance in the market, the central bank is providing an additional source of liquidity to banks as a complement to our open market operations. The Term Auction Facility gives us a tool that lies somewhere between our open market operations and our primary credit program. It provides a mechanism for expanding the range of collateral against which we provide funds to the market – in effect to change the composition of our balance sheet – in ways we cannot do through traditional open market operations. And it does this in a way that may be more effective in mitigating a broader marketwide liquidity shortage than does the existing discount window facility, in part because of the perceived stigma in recourse to a facility that has come to be regarded as a source of funds for individual institutions facing a temporary, exceptional need for liquidity.

Timothy F Geithner: Restoring market liquidity in a financial crisis Welcoming remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Second New York Fed-Princeton University Liquidity Conference, New York, 13 December 2007. *  *  *  Welcome to the New York Fed and to this conference on liquidity. You are addressing some of the most important issues affecting financial markets today. Your timing is good, perhaps too good. We are all going to need some time and perspective before we will know enough to draw conclusions and recommendations from the events of the past six months. The conditions that led to this crisis took a long time to develop and they will take some time to resolve. I think it is appropriate, though, that as central banks act to address the challenges in markets today, we also begin to define the agenda for future research and policy. On December 12, the Federal Reserve and several other major central banks, announced a series of actions in response to the elevated pressures in funding markets. Together, these actions provide a more flexible and potentially more effective set of instruments, alongside our conventional monetary policy instruments, to help mitigate the risks that liquidity pressures in markets going forward could pose to the broader economy. With this framework of tools, we have the capacity to calibrate our response as market conditions change.
The challenge of managing risks in the financial sector is made greater by the tremendous spirit of innovation that fuels growth and healthy competition among banks and other firms. Bankers have long competed on their abilities to tailor products and services to each client’s unique needs. New opportunities for profit often change the nature of the known risks a bank may face - they may also expose an institution to unknown pitfalls. As a former commercial banker, I know that responsibility for understanding and managing risks and potential pitfalls rests with senior management and its board of directors. As a supervisor, I believe that we should create incentives to help motivate responsible behavior within firms. Further, as Chairman of the Basel Committee, I see the work of the Committee as helping to foster safe and sound banking systems by creating incentives for banks to improve their understanding and management of risk, and, in turn, to contribute to greater stability within the financial sector. Encouraging the improvement of risk management in banks, is, indeed, the overarching goal of the Committee's efforts to revise the Basel Capital Accord. In my remarks today, I’d like to focus on the challenges associated with implementation of the new framework now that the revision process is coming to an end. First, I'll spend a few moments discussing the evolution and structure of the New Accord.

BIS central bankers’ speeches  3  Another theoretical argument can be made suggesting that independent national monetary policies could be more expansionary when national fiscal policies turn restrictive in the pursuit of fiscal consolidation. In principle, national monetary policies have the advantage of being able to counter the negative pressure on inflation produced by the fiscal tightening. In practice, however, countries in urgent need of fiscal retrenchment do not necessarily experience lower inflation. At present, inflation is higher than the euro area average in Portugal, Ireland, Spain and, in particular, Greece. In a counterfactual without the euro, the national monetary authorities responsible for monetary policy could not implement a more expansionary policy stance than is currently the case in the euro area as a whole without endangering their credibility and the maintenance of price stability. These observations are broadly supported by the experience here in the United Kingdom. Despite the extra degree of freedom offered to policy-makers by remaining outside the euro area, economic activity in the UK remains further below its pre-crisis peak than either in Germany or France. In relative terms, the depreciation of sterling against the euro has not cushioned growth but rather led to a higher rate of domestic inflation in Britain than in the euro area. In sum, I would maintain that there are no clear reasons for believing that cross-country variation in economic performance within the euro area has proved larger than would have been the case if national monetary policies had been retained and the euro not introduced.
There are challenges to measuring the return on capital. Following the literature, we measure it in national accounts data as the gross operating surplus (the output of the firm minus their labour costs and capital depreciation), per unit of capital, adjusted for capital gains. Reis (2021) shows a similar pattern across a series of alternative measures of the return on capital using US data. See Bailey et al. (2022) for more details. 17. In reality, firms borrow at a premium over the risk-free rate capturing, among others things, the riskiness or uncertainty of the investment project and intermediaries’ risk aversion. Some (for example Broadbent, 2016; Vlieghe, 2017; and Melolinna et al., 2018) have discussed how changes in these factors may have increased the premium, in particular since the global financial crisis. Others argued that, since intangible assets are more risky, this premium has increased as the economy has become more intangible intensive (Haskel and Westlake, 2022). Such an increase would imply that funding costs have not declined in line with risk-free rates, so that the rise in the wedge that we consider here would partially reflect a rise in firms’ borrowing costs. However, as described in more in detail in (Bailey et al, 2022), the results documented below are robust to adjusting the estimated wedge for firms’ funding costs. 18. The accompanying paper looks at the period from the early 1970s (Bailey at al., 2022). The dynamics of the wedge followed a U-shaped pattern: falling from the 1970s to the 1990s and then rising.

[11] Productivity growth impacts R* through firms’ optimal level of capital for production, in other words the demand for capital from firms. Lower productivity reduces the potential returns on new investment (the marginal product of capital) and this reduces firms’ demand for capital at a given interest rate. In equilibrium this reduction in demand lowers R*. The model simulations suggest that this effect accounts for almost half of the decline in Global R* over this period. Population ageing has been driven by a decline in population growth rates relative to the high levels seen following the Second World War and a marked increase in life expectancy. Importantly, however, in the model the impact of ageing comes almost entirely from the rise in longevity, rather than the decline in population growth rates. What this means is that the effect of population ageing on the trend real rate is not a consequence  Page 8  of the so-called ‘baby boom’. Instead, it reflects the fact that the oldest generations in the population – including older retirees – also tend to be those who have accumulated the most wealth. This naturally occurs as households accumulate wealth over their working life, in order to fund their retirement. This means that a shift in the age distribution towards these cohorts, in other words population ageing, will increase total wealth in the economy. [12] The equilibrium real interest rate falls to incentivise firms to invest this additional wealth into productive capital.