samchain/econo-pairs-v1 huggingface dataset:
The first situation is when the highly leveraged institutions taking very large positions are overwhelmed by market forces. As the case of LTCM has illustrated, highly leveraged positions can pose serious risks to systemic stability even in the large and established markets of the developed economies. As the highly leveraged institutions are, for circumstances they have not factored into their mathematical models, forced to unwind their very large positions, particularly against the background of highly volatile and illiquid market conditions, the credit losses of institutions providing the highly leveraged institutions with funding can be huge. The rapid de-leveraging of large positions by highly leveraged institutions is also highly contagious in that it in turn exacerbates volatility and reduces liquidity not only in the markets concerned, but also in other markets. The rapid de-leveraging of the short yen positions by the hedge funds in October last year is a good example of the volatility that can result. The yen strengthened by 11% to 111 over a couple of days. Such volatility affects the positions of yet other highly leveraged institutions and their counter-parties providing them with credit. The potential for market dislocation and the systemic risks this posed were so serious that, as you all know, last September the Federal Reserve Bank found it necessary to broker an unusual package by a consortium of banks to rescue LTCM. The second situation is when the smaller markets are overwhelmed by the forces of the highly leveraged institutions.

Although reform of the financial architecture has to be done on an international basis, there is much that can also be done through regional co-operation both to help advance the reform process and to promote parallel and complementary initiatives. Regional forums, of the kind that we are engaged in today, are way of gathering views and developing consensus so that collectively we can carry more weight, and speak with a more unified voice, in the international forums. They also help to ensure, for example, that the standards and best practices formulated in an international context are workable in the context of Asia. Regional co-operation can help give a spur to closer international co-operation by ensuring that our recent experience and our special needs as open, emerging markets are taken into account in the larger process of reforming the international financial architecture. We are a diverse region, and the crisis of the past couple of years has affected us all in different ways. But the fact that it has affected all of us underlines the need for us to work together as a region in our efforts to prevent future crises. BIS Review 47/1999  6
The Basel Committee may therefore need to review the standards for the LCR and the NSFR. 12  See EU Commission (2023), https://finance.ec.europa.eu/publications/reform-bank-crisis-management-anddeposit-insurance-framework_en. 10 [30]  Another lesson is that Silicon Valley Bank did not take sufficient account of its interest rate risks. Here I would like to emphasise the importance of all banks – including in Sweden – having a good margin for the risks that interest rate changes can entail. 30 years of low interest rates have contributed to increasing the risks in the financial system. Households and businesses in many countries have large debts while prices of homes, commercial properties and financial assets are high. The sharp and rapid rise in global interest rates experienced over the past year has brought interest rate risks into sharper focus. Current global standards require supervisors to take interest rate risk into account as part of the supervisory process, known as Pillar 2. The consequence is that these risks are managed very differently in different countries, and potentially even between different banks. Finansinspektionen has a well-developed model for estimating these risks for the Swedish banks, but, as I said, the rules vary from country to country. In my view, there is reason to harmonise some of these rules. A third lesson is that accounting rules play an important role. When macroeconomic variables change significantly, the difference between the valuation of assets at fair value and at amortised cost can be large. Silicon Valley Bank had invested heavily in US long-term bonds.

But this does not prevent us from exchanging information on issues relevant to monetary policy and its target fulfilment with, for instance the Riksdag Committee on Finance and the Ministry of Finance. This could, for example, involve how we view resource utilisation in Sweden and abroad. How savings and consumption develop and why. Which shocks to the macroeconomy are permanent or temporary, or how the effects of major shocks to the economy should be analysed, such as during the pandemic. The policy rate should be the main tool of monetary policy and asset purchases should be made with caution. Such purchases are particularly effective to counteract financial crises. Asset purchases in the form of government bonds may be justified in time when monetary policy needs to become more expansionary, but the threshold for extensive bond purchases to safeguard the inflation target should be high. Asset purchases can have negative side effects, which should be closely monitored. For example, markets may start to perform less well or private actors whose securities are bought by the central bank may become accustomed to the fact that there is always some form of government support when making bad deals. Moreover, the economic consequences of large asset purchases are still unclear. We therefore need more analysis and knowledge of the effects. Having said that, I would still like to emphasise that asset purchases should remain part of our toolbox. High inflation It cannot have escaped anyone's attention that inflation is currently very high.
In contrast to developments in short-term inflation expectations, long-term euro area inflation expectations and the associated risks have remained relatively stable (slide 15). For example, the five-year forward break-even inflation rate (BEIR) five years ahead has fluctuated between 2.0% and 2.5%. Moreover, a decomposition of BEIRs into inflation expectations and related premia suggests nonetheless that the term structure of inflation risk premia in the euro area is upward sloping and its fluctuations are the main driver of fluctuations in BEIRs, with (long-term) inflation expectations anchored at levels consistent with price stability. 9 Recent research has also shown that there are substantial differences in the determinants of short and long-term inflation expectations derived from BEIRs in the euro area. 10 In  7  See Ejsing, J., J.A. Garcia and T. Werner (2007) “The term structure of euro area break-even inflation rates: the impact of seasonality”, ECB Working Paper No 830; Gurkaynak, R., B. Sack and J. Wright (2009), “The TIPS yield curve and Inflation Compensation”, American Economics Journal: Macroeconomics, forthcoming.”  8  Other inflation derivatives allow investors to hedge against inflation rates exceeding certain threshold (inflation cap) or being below a certain level (inflation floor) and thereby convey information about the value of the perceived risk of hitting those thresholds by estimating option-implied densities and measures of perceived market uncertainty. Since the lowest maturity of caps and floors are two years (in some cases three years), the volatility is an average of the one and two-year (and three-year) caplet volatility.

I am thinking particularly of the injunction to smile and whistle through all difficulties. Certainly I am sometimes tempted, when asked to explain the state of opinion in London, to take refuge in a cheery smile, and to begin to whistle a mournful tune (not easy to do at the same time, you will find). Fortunately, it is not my responsibility to discuss the politics of EMU in the United Kingdom. Another good reason for me not to do so is that I would like to keep my job. As a humble central banker, a mere technician, it is more appropriate for me to focus on the economic dimension of EMU and to say something, also, about the financial market implications which concern us, particularly given the Bank of England’s position at the heart of the City of London. In both these areas - economic and financial - the Boy Scout motto is particularly apposite today. Let me explain why. At the Bank of England we have always held the view that Economic and Monetary Union is a momentous enterprise, with huge consequences for European economies. The act of irrevocably fixing exchange rates, between economies which have in many cases been managed separately for centuries, is not a step to be undertaken lightly. It is an exciting venture, almost too exciting for some, perhaps.
This is sometimes described as choosing a point on the Taylor frontier showing, as in Chart 4, the combinations of lowest volatility of inflation for a given volatility of output. 9 That optimal choice leads to a policy reaction function describing how the central bank responds to shocks hitting the economy. 10 The success of the New Keynesian framework was that it showed how the long run objective of price stability could be implemented by an appropriate central bank policy reaction function. It stressed the importance of expectations and credibility, to which too little attention had been paid during the inflationary episodes of the 1970s and 1980s. But inevitably, as with all models, the basic New Keynesian model omits a number of key factors. The treatment of expectations is simplified, and neglects the possibility that expectations themselves may be a source of fluctuations, rather than simply reflecting changes elsewhere in the economy. Sentiment can vary, misperceptions occur, and people can change the heuristics they use to cope with a complex world. 11 And it lacks an account of financial intermediation, so money, credit and banking play no meaningful role. Those omissions obviously limit the ability of the model to help us understand the trade-offs between monetary policy and financial stability.

•  We are encouraged that regulators in the US and Europe have adopted a substituted compliance or equivalence assessment approach so that entities can comply with just the set of rules applied by the jurisdictions in which they operate. •  MAS supports substituted compliance and equivalence assessments as an important measure to avoid potentially duplicative or inconsistent rules, particularly for entities with international operations. In the area of OTC derivatives trading, MAS is putting in place the rules and infrastructure to support cross-border operations and to help reduce uncertainty to the industry. To allay concerns from the industry over the regulatory burden of having to comply with both home  BIS central bankers’ speeches  5  and host regulations, we are participating in equivalence assessments under the US and European regimes. Thus far, ESMA, the European securities regulator, has recommended to the European Commission that the Singapore framework is broadly equivalent to Europe’s, paving the way for central counterparties in Singapore to offer their services to European participants. We have also submitted to CFTC an application for substituted compliance in respect of requirements on US banks operating here. We are in active discussions with CFTC, and will work with them on the substituted compliance determination, where appropriate, as our OTC regulatory regime comes into force. Impact on trade finance and long-term finance The final unintended consequence is the impact on trade finance and long-term finance.
And it must be possible to distribute the socioeconomic burdens in the wake of a cross-border crisis in a reasonable and preferably fairly predictable manner. Otherwise there is a risk that conflicts between national interests will make the management of a crisis more difficult and prolonged. Another aspect which has come to the fore in the recent financial turmoil is the banks’ increased dependence on liquidity in the securities markets for their risk management and financing. Central banks around the world need to examine whether they have the necessary tools to manage coming liquidity crises. The question of when and how liquidity support can be given and how such a decision should be communicated without having a stigmatising effect that counteracts its purpose may require new ways of thinking. 10  BIS Review 30/2008  Better regulations and increased cross-border cooperation are necessary Let me in conclusion observe that the financial turmoil currently prevailing bears a number of clear parallels to many other financial crises – not least the Swedish bank crisis of the 1990s. The bank crisis was in many ways the wake-up call that made the Riksbank and other authorities realise the serious consequences that a lack of stability in the financial system can have. It led to the Riksbank developing an analysis capacity in the field of financial stability. Ten years ago the Riksbank published the first of its now regular Financial Stability Reports. I can warmly recommend that you read them.

This can sorely test the coordination of the exchange of information and the decision making. The Swedish bank’s substantial activities abroad have therefore meant that the Riksbank has entered into a number of agreements on cooperation in the event of financial crises with the central banks in the other Nordic countries and in the Baltic states. There is now also an overall agreement on crisis management at EU level – a Memorandum of Understanding, MoU. This covers central banks, supervisory authorities and finance ministries in all of the member states. Agreements of this nature are valuable because they create orderly forms for cooperation. They create necessary contact networks and not least a common parlance, which can be of great importance when managing a crisis. But these MoUs also have shortcomings. They are often worded in a vague and general manner and are not usually legally binding; more a declaration of intent. But the most serious deficiency is that they do not take into account the conflicts between national interests which may arise in a crisis situation. These should be added to all of the other conflicts which may arise between different interested parties and authorities with different objectives. Conflicts between national interests can be particularly prominent if the socioeconomic costs of a crisis in a cross-border institution are unevenly or unreasonably distributed between different countries. This could in some situations affect the willingness to contribute constructively to an overall solution of the crisis.
For insurers, the challenge for this first half of 2019 is to prepare the 2020 Solvency II review. The ACPR and the Ministry of the Economy and Finance will coordinate an open and comprehensive assessment in order to identify avenues for reform: on equity holdings and long-term investment, on excessive volatility, on simplifications of the prudential framework, including its reporting, etc. However, this supposes a collective involvement of professionals, which I call for tonight, and European convergences, which we will endeavour to achieve. I would like to come back to a 2018 innovation, which contributes to financial stability: the decision taken in June to introduce a “countercyclical buffer” for banks at the minimum rate of 0.25%. It is not a matter of curbing credit today, but rather of building up reserves that would be available in the event of a reversal of the cycle tomorrow. Fortunately, annual credit growth has remained very dynamic since June – at 5.5% of which 6.1% for SMEs: the French High Council for Financial Stability is therefore ready to raise this “buffer” moderately as soon as necessary. However, the new risks are technological as well as financial. Cybersecurity must be a concern for all public and private players. This will be a priority of the French Presidency of the G7. 3 – My third and last wish is for inclusive finance The yellow vests movement has given rise to unacceptable violence – including against bank and insurance company branches – and strong demands for greater economic and social justice.

The monetary reform in 1965 replaced the earliest Lek banknotes with new ones, in a ratio of 10 to 1, by changing at the same degree the value of prices, wages and, of any other financial operation. Since then, most of citizens have not been adopted yet with this change and are used to communicate with the outdated term “old lek”, driving to confusion in both the communication of prices of goods and services and the accurate reading of economic and financial indicators. Even before the launching of this awareness campaign -postponed due to the difficulties caused by the restrictions imposed to tackle the Covid-19 pandemic situation – the Bank of Albania has been attentive in encompassing this message in its educational publications and programmes, such are: Global Money Week, or the campaign on the issue in circulation of the new banknotes. Recently, we have conducted the measurement on the use of terminology “new lek” – “old lek” on a national level, through the inclusion of dedicated questions in the survey on measuring financial literacy of the Albanian population structured pursuant to the model of International Network of Financial Education (INFE, OECD). The analyses of these questions provides information on the degree of wrong use of terminology by: location-residential, age-group, gender, education, employment and average level of income, as well as the settings where it is more frequently used; aimed at adopting the campaign undertaken by the Bank of Albania on the elimination of the outdated terms “new lek”- “old lek”.
This underscores the fact that our long-term refinancing operations are designed to assist banks in their control and management of liquidity risk. They are not an instrument of commitment to a future policy path. We will return to a competitive tender procedure for three-month operations in the second quarter of 2010. At the same time, we have made it clear that we will continue to conduct our weekly main refinancing operations and one-month operations as fixed-rate tenders with full allotment for as long as needed and, in any case, until 12 October 2010. BIS Review 29/2010  5  While we monitor the conditions for a gradual phasing-out very attentively, we are convinced that a delayed exit from extraordinary liquidity support would distort market behaviour and misallocate credit. We do not wish to breed dependency. Banks might become dependent on today’s very favourable access to central bank refinancing to such an extent that their incentives to repair their balance sheets remain weak. Moreover, permanent extraordinary liquidity measures provide undifferentiated support to all banks, whether in liquidity deficit or in liquidity surplus. This opens the door to opportunistic bidding behaviour and to a sort of arbitrage across assets that is unproductive. What is our end point? We view the pre-crisis operational framework as a very natural reference point for the phasing-out process. Of course, we are reviewing carefully the potential lessons of the financial crisis for the design of our operational framework.

Jean-Claude Trichet: Risk and monetary policy Lunch remarks by Mr Jean-Claude Trichet, President of the European Central Bank, at the Stanford Institute for Economic Policy Research (SIEPR) Economic Summit, Stanford University, Stanford, 12 March 2010. *  *  *  Ladies and gentlemen, It is a pleasure to be in California today. I am delighted to have been invited by the Stanford Institute for Economic Policy Research to address the Economic Summit. Stanford University and the area that surrounds this spectacular bay are renowned across the world for a highly productive blend of scientific innovation and entrepreneurial business. Financial innovation is part of scientific progress. It is an engine of growth and prosperity. Yet, the key question, which I would like to highlight in my remarks today, is to what extent financial innovation serves the real economy and to what extent it only serves itself. At some point in our recent past, finance lost contact with its raison d’être. It ceased to be a source of services for the real economy and developed a life of its own. Finance became selfreferential. I will briefly review the driving forces that led to this situation and the profound crisis that followed. Financial crises have been a recurrent feature of human history. Let me take you back over two millennia in Europe to see how the great historian Tacitus described the financial crisis that hit the Roman Empire in the year 33 AD.
Spreading the use of revenues in this way is in line with the fiscal rule as it has been formulated. As a result of the change in the inflation outlook two years ahead, Norges Bank’s Executive Board decided to reduce the key rate by 0.5 percentage point, to 6.0 per cent, on 22 January. In its assessment of the inflation outlook, Norges Bank pointed out that the krone has strengthened since the October Inflation Report and that it was 3 per cent stronger than the assumption underlying the baseline scenario. We also cited fears of war and high oil prices, a weak and unsteady global recovery, higher electricity prices, lower optimism among households and the prospect of lower growth  in private consumption than previously projected. We also pointed out that we had not yet seen the full impact of high wage growth and a strong krone on employment in enterprises that are heavily exposed to international competition. On balance, developments point to low inflation in the period ahead. According to Norges Bank’s assessment, with an interest rate of 6.0 per cent, the probability that inflation two years ahead will be lower than 2½ per cent is greater than the probability that it will be higher. The global recovery is weak and unsteady. Growth forecasts for our trading partners were revised downwards in the course of last year. The situation has been marked by fears of war in Iraq over a longer period. US - consumer confidence Monthly figures. Seasonally adjusted.

BIS Review 4/2003  1  Output gap Per cent of trend GDP 6  6  5  5  4  4  Hodrick-Prescott method  3 2  3 2  Production function method  1  1  0  0  -1  -1  -2  -2  -3  -3  -4  -4  -5 -5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002  Sources: Statistics Norway and Norges Bank SG Gausdal 31.01.03  At the beginning of the 1990s, the economy was in a deep recession. Production was well below 1 capacity. When growth in the economy picked up, capacity utilisation increased. The output gap , according to our methods of calculation, was closed around 1996. Thereafter, cost inflation and the rise in prices for goods and services produced for the domestic market accelerated. The upturn reached its peak in 1997, with GDP growth approaching 5 per cent. The pace of such a strong upturn could not be sustained. In 1997 and 1998 the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. Stock market prices in Norway and the US Monthly figures.