samchain/econo-pairs-v1 huggingface dataset:
Almost no disruptions have occurred. We are steadily working on improvements to ensure a robust and efficient system also in the years ahead. Payments often start when an individual or firm makes a payment using an online banking service or using a payment card. Most payments are relayed from the data processing centre in the customer’s bank to NICS. On the basis of all payments we as customers have made, NICS calculates a position for each bank vis-à-vis the other banks. The result of this clearing is sent four times a day to NBO. There the balances of banks’ accounts with Norges Bank are adjusted. When the banks have been notified that the settlement in Norges Bank is in order, the banks adjust their customers’ accounts. All the large banks participate in these settlements. DNB and SpareBank 1 SMN also participate in the settlement in Norges Bank on behalf of smaller banks. Today, Norges Bank has published a new survey of payment costs using data from 2013. The overall social costs of using cash, payment cards and giro payments amount to just under NOK 15 billion, 3 or 0.6 percent of mainland GDP. The estimate includes the costs for both providers and users of payment services. These costs have declined since they were last estimated in 2007. Compared with other countries, the costs of the Norwegian payment system are low. This is a benefit to customers and represents a comparative advantage for the Norwegian business sector.

IT systems and websites are vulnerable to attack by criminals. Attacks can put services out of order and reduce confidence in the systems. Attacks take ever newer forms. This requires that system owners keep updated on the various kinds of attack. The establishment of FinansCERT by Finance Norway is a sound measure in this regard. In addition, participants must ensure robust defences against attack. This will not be any easier in the period ahead. Nevertheless: if we are to reap the benefits of IT and online services, a substantial use of resources on monitoring and security is a price we must pay. Banks and Norges Bank must in the worst case deal with situations where all or part of the payment system has been put out of action. New technology may in the longer term usher in new contingency arrangements. Even so, to date no sufficiently adequate alternatives have been documented to allow cash to be written off as a part of the overall solution. 8  Appendix F in the CPMI-IOSCO principles. BIS central bankers’ speeches  5  Finanstilsynet and Norges Bank are now examining closely contingency preparedness for both electronic payment and banks’ contingency arrangements for cash distribution. Norges Bank shall ensure that society has access to cash as a means of payment. Banks can make cash withdrawals based on deposits in Norges Bank. The general public go to their banks to withdraw cash. The Government presented a bill for a new Financial Institutions Act before summer.
1,2  Labour markets have been subject to big structural shifts over recent years, including the secular fall in the degree of worker unionisation in a number of industries (for example, Schnabel (2013)), the emergence of the so-called “gig economy” (for example, Taylor (2017) and Katz and Krueger (2017)) and secular rise in the degree of globalisation and automation in the workplace (for example, Brynjolfsson and McAfee (2014) and Acemoglu and Restrepo (2018)). Each of these shifts has led to a change in employment patterns and tenures and in workers’ bargaining power. These structural shifts have been used to help explain the secular fall in labour’s share of national income and the recent weakness of wage growth across a number of advanced economies (for example, Dao et al 3  (2017) and Abdih and Danninger (2017)). They have also been used to justify potential shifts in the position and/or the slope of the Phillips curve (for example, Blanchard (2016) and Kuttner and Robinson (2010)). Each of these potentially has a bearing on the setting of monetary policy. Yet, over the same period, structural shifts in the product market have been no less profound. They include the emergence of highly-integrated global supply chains, increasing the degree of specialisation of product markets (Baldwin (2016)); the blossoming of companies benefitting from global network economies of scale and scope, who acquire “superstar” status (Autor et al (2017)); and the rapid emergence of e-commerce and price-comparison technology (Cavallo (2017)).

1.2 = 20%) Mean (weighted by total sales) Median (weighted by total sales)  1.6 1.5 1.4 1.3 1.2 1.1 1.0  1987  1990  1993  1996  1999  2002  2005  2008  2011  2014  2017  Sources: Thomson Reuters Worldscope and Bank calculations  29  All speeches are available online at www.bankofengland.co.uk/speeches  29  Chart 10: Skewness of UK-listed firms’ mark-up distribution by sector Mining and quarrying  Manufacturing  Transport and storage  Skewness coefficient 6  Skewness coefficient 5  5  4  Skewness coefficient 4  3 4  3 2  3 2 2  1 1  1  -1 1987  1993  1999  2005  2011  2017  0  0  0  -1 1987  1993  ICT  1999  2005  2011  2017  -1 1987  Construction  1993  1999  2005  2011  2017  Wholesale and retail  Skewness coefficient 5  Skewness coefficient 5  4  4  Skewness coefficient 7 6 5  3  3  2  2  1  1  4 3 2 1  1993  1999  2005  2011  2017  Accommodation  0  0  0 1987  1987  1993  1999  2005  2011  1987  2017  Arts, entertainment and recreation  Skewness coefficient 5  1993  1999  2005  2011  2017  Administrative and support services  Skewness coefficient 2.0  Skewness coefficient 6 5  4 1.5  4 3 1.0  3  2 2 0.5 1  1  0 1987  1993  1999  2005  2011  2017  0.0 1987  1993  1999  2005  2011  2017  0 1987  1993  1999  2005  2011  2017  Sources: Thomson Reuters Worldscope and Bank calculations.
Our new conditional inflation forecast is based on the assumption that the SNB policy rate is 1.5% over the entire forecast horizon (cf. chart 1). Stronger second-round effects and the fact that inflationary pressure from abroad has increased again mean that, despite the raising of the SNB policy rate, the new forecast is higher through to mid-2025 than in December. The new forecast puts average annual inflation at 2.6% for 2023, and 2.0% for 2024 and 2025 (cf. table 1). Without today’s policy rate increase, the inflation forecast would be even higher over the medium term. Uncertainty regarding price developments going forward remains high, and there is above all the risk of elevated inflation becoming embedded. Global economic outlook  What is the economic outlook? The global economy hardly grew in the fourth quarter. Nevertheless, Q4 2022 and Q1 2023 will likely be slightly less weak overall than expected in December. Inflation is currently clearly above central banks’ targets in many countries. Against this background, numerous central banks have tightened their monetary policy further. The growth outlook for the global economy in the coming quarters remains subdued. At the same time, inflation is likely to remain elevated worldwide for the time being. Over the medium term, however, it should return to more moderate levels, not least thanks to monetary policy and due to the economic slowdown. Our scenario for the global economy is subject to significant risks, in particular due to the recent turmoil in the global financial sector.

Today, we can look back on a period of more than three years in which the ECB has successfully pursued a stability-oriented single monetary policy serving more than 300 million citizens. And we all have the tangible proof of Monetary Union in our pockets, following a highly successful cash changeover process which represents another historic milestone in the process of European monetary integration. Indeed, already now the level of cash payments in euro is close to 100% in all the countries of the euro area. This means that the cash changeover can be considered as good as complete, i.e. well before 28 February, after which date the legacy currencies of the euro will no longer be legal tender in any euro area country. Together with the Treaties founding the European Communities, the Maastricht Treaty is one of the most important and visionary legal texts in the history of the European integration process. With the euro, the Treaty offered tangible proof of what the vision of European Union is about, namely bringing the people of Europe closer together and ultimately facilitating their lives. Having been instrumental in laying the foundations for the euro, the Maastricht Treaty will remain vital and indispensable for the successful functioning of EMU. The medium-term macroeconomic policy framework laid down in the Maastricht Treaty has contributed to a stable macroeconomic environment, and will continue to do so. In addition, the Treaty provides for a clear allocation of responsibilities between EU institutions and Member States, as well as clear mandates for all involved.
It has helped to ensure that the risks to financial stability associated with a persistent low interest rate environment have so far not increased to any significant degree since the introduction of negative interest. It is therefore all the more important for monetary policy purposes that we thoroughly understand the transmission mechanisms of negative interest. We have therefore extended our analyses in this area and are in regular contact with the relevant market participants. Third, as far as the impact of negative interest on investors is concerned, varying levels of risk appetite are observed. Domestic investments appear to be particularly popular. In international capital flows, we are continuing to see a strong aversion to risk among domestic investors. Current account surpluses in the economy are generally converted into Swiss francs and no longer invested abroad. This contributes significantly to the strength of the Swiss franc. From a monetary policy perspective, increased willingness on the part of major investors to take additional risks would certainly be desirable. Focus shifted to the foreign exchange market  Let me turn now to the foreign exchange market. As I mentioned already, the SNB started to make large-scale purchases of foreign currency against Swiss francs in 2009. Naturally, the foreign exchange market is therefore of great interest to us. We are active in the foreign exchange market at all market hours. This is a particular challenge. After all, it is a global market and trading takes place round the clock.

Based on the examples of negative interest and foreign exchange market interventions by the SNB, I have shown that the requirements, scope and complexity of analyses as well as the importance of regular market contacts have significantly increased in this environment. Unconventional monetary policy has extended central banks’ reach in the financial markets, and their direct influence on various financial markets has increased. To reiterate, this is desirable from a monetary policy perspective since it helps to transmit the required monetary policy stimuli to the economy and inflation. Just how much the activity, sometimes intensive, of central banks on the financial markets has changed traditional price relationships and correlation patterns is difficult to answer definitively. However, it is still the case that financial market prices reflect investor expectations for the future development of the economy and inflation. I would like to thank you for your attention, and hand over to my colleague Dewet Moser.
4  BIS central bankers’ speeches  Existing models, then, do not tell us why stability today may come at the expense of instability tomorrow. Perhaps we should heed the advice of Ricardo Caballero, who has written that “macroeconomic research has been in ‘fine-tuning’ mode within the local maximum of the dynamic stochastic general equilibrium world, when we should be in ‘broad-exploration’ mode”. 14 So let me now move into broad exploration mode and give three examples in which a trade-off between monetary and financial stability might arise, and which could in theory justify a policy of aiming off the inflation target in order to reduce the risk of future financial instability, before I turn to whether such a policy would have been appropriate before the crisis. The first is where misperceptions about future incomes persist and are embodied in key prices, such as the exchange rate and long-term interest rates. Households, businesses, and banks can all make big mistakes when forming judgements about the future, and make spending decisions today which they will come to regret when their true lifetime budget constraints are revealed. There is no mechanism for ensuring that misperceptions about the sustainable level of spending are corrected quickly. It may take many years before those beliefs are invalidated by experience. So an equilibrium pattern of spending and saving can emerge that is stable temporarily but not sustainable indefinitely. And misaligned prices may reinforce mistaken beliefs if people are using market prices to extract signals about future incomes and consumption opportunities.

It is arguable, though not certain, that in the absence of a macro-prudential regime or tighter fiscal policy, persistently higher interest rates might have been a second-best strategy. It would, though, have been a big gamble. As the Chairman of the Federal Reserve, Ben Bernanke has remarked, “the issue is not whether central bankers should ignore possible financial imbalances – they should not – but, rather, what is ‘the right tool for the job’ to respond to such imbalances”. 32 So it is vital that macro-prudential tools and micro-prudential regulation are part of the armoury of a central bank to mitigate, if not prevent, the build up of excessive leverage and risk-taking in the banking and wider financial sector. From next year, the Bank of England will have those responsibilities, and the new Financial Policy Committee is already up and running. But macro-prudential tools deal with symptoms rather than the underlying problems of misperceptions and mispricing. Although we think the new tools given to the Bank would have helped to alleviate the last crisis, it would be optimistic to rely solely on such tools to prevent all future crises. It would be sensible to recognise that there may be circumstances in which it is justified to aim off the inflation target for a while in order to moderate the risk of financial crises. Monetary policy cannot just “mop up” after a crisis. Risks must be dealt with beforehand.
But it must be recognised that these interventions are not to manage the level of exchange rate, as the ringgit remains a floating currency. Demand and supply forces must be allowed to determine the level of the exchange rate. But at the same time, we cannot be oblivious to the aberrations in demand and supply, originating from large speculative positions. Large swings in the exchange rate are detrimental to our country. It is highly risky for an open economy like Malaysia that relies on international trade activities and exchange rate as a price mechanism. Through experience and practice, we have generally accepted that in a floating rate regime, the market should be left to its devices in determining exchange rate levels. However, empirical evidence suggests that markets mechanisms often go through bouts of distortion. This is not at all surprising. It is proven time and again. The latest Nobel Prize recipient for economics, Professor Richard Thaler’s work have centred on the essence that economic agents are humans. And humans are irrational. This is the opposite of conventional economics that rely on the central assumption that all economic agents behave rationally. This irrationality is the main catalyst for speculative activities in the FX market. When speculative activities are large, they can swing towards extremes. Under these situations, and from the central bank’s perspective, intervention is then necessary to rebalance the supply and demand forces, and to manage the volatility caused by violent swings in the exchange rate. Intervention in a floating rate regime is not new.

Most of these are not statistically based, but rather convenient rules-of-thumb that ended up shaping our perception and driving sentiments. Unfortunately, in this information age, these perceptions and negative sentiments can be perpetuated rapidly and become self-fulfilling. The widespread negative coverage in the mainstream media feeds on our confirmation bias, where we seek out information that confirms rather than contradicts our preconceptions. And when such information becomes widely available, we risk falling into a self-reinforcing process known as the ‘availability cascade’, whereby a simple idea, whether it be right or wrong, gains traction given repetition and inherent simplicity. As the saying goes, “Repeat something often enough and it will become true.” Second, we tend to, in some other instances, base our perception on prior evidence and situations that we are familiar with, rather than update our views with new information. For many economists and analysts, Malaysia is an oil-dependent economy. When the oil price goes south, the Malaysian economy suffers. While this was true many years ago, these simple relationships are continuously assumed to be fixed and hold to perpetuity. Despite the many structural changes leading to a more diversified Malaysian economy and reduced reliance on oil, this perception has persisted. For the uninitiated, the percentage of oil revenues to government 2/7  BIS central bankers' speeches  revenues was 41.3% in 2009 compared to only 14.6% in 2016. This fact seems to elude many analysts.
Prepared for the Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2008. 10  You can think of the investors of the lower rated tranches as “buying” all of the subprime mortgages contained in the securities and borrowing funds from the investors in the highly rated securities. The thinner the initial credit protection, the higher the initial leverage that was being used to essentially purchase the underlying subprime mortgages. Repackaging these securities into CDOs and CDO-squared securities further increased the effective leverage. BIS Review 92/2010  5  overnight, reaching 75 percent in 2008. 11 These small haircuts implied that the broker dealers could use considerable leverage themselves in purchasing these securities. So, leverage was high at all levels of the financial chain from the individual subprime borrowers, to the investors in the lower rated securities, and to the broker dealers who invested in the highly rated securities. At their peak, subprime mortgage related securities amounted to only around $ trillion dollars – a relatively small size given the overall size of the repo market. Leverage, however, amplified the losses as house prices began to decline. Why did the point at which house prices peaked and started to fall in some housing markets spark a run on the repo market? Additionally, why did the problems in subprime mortgage assets spread quickly to other assets? Gary Gorton uses the analogy of an E. coli breakout. 12 Suppose that E. coli is thought to have infected a small quantity of the country’s meat supply.

Whereas two years ago we were trying to fight off heavy appreciation pressures against the krone, we have since last summer seen quite the opposite tendency. Last year, the krone exchange rate moved on a weaker trend, in spite of continued government budget surpluses and our still relatively healthy current account. As downward pressure on the krone grew, Norges Bank raised its key rates in seven steps last year, in line with its mandate to stabilise the krone exchange rate. In the course of five months, key rates were raised by a total of 4½ percentage points. In spite of this, the krone has been weaker than its initial range vis-à-vis European currencies since last August. In this situation, the focus of monetary policy must be to adjust fundamental factors in a way consistent with a return of the krone to its target range. Of course, monetary policy can do nothing to reverse the terms-of-trade shock brought about by the steep fall in BIS Review 16/1999  –2–  commodity prices. However, the aim to stabilise the krone against European currencies implies that inflation over time cannot deviate from the inflation in these countries. If inflation is brought in line with inflation in the euro area, a return of the krone to its initial level becomes more likely. Thus, in the current situation Norges Bank must focus on relative inflation when setting interest rates.
Using a near risk-free benchmark, such as SONIA in sterling markets, rather than LIBOR should, amongst other things:  4  https://www.theice.com/publicdocs/ICE-LIBOR-Weekly-Report-10Jun_2019-14Jun2019.pdf 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6    Reduce the funding mismatch for Bank Rate tracker mortgages bundled into securitisations;    Increase certainty for corporate borrowers wanting to lock in a fixed credit component at the time bonds are originated;    Allow market participants to take or hedge risk related to the evolution of monetary policy rates through swaps and other instruments without unintentionally introducing a variable credit component; and    Incentivise the development of new products, such as swaptions based on risk free rates, allowing more efficient hedging of interest rate volatility, either on their own or as part of structured products . It has been argued that moving away from LIBOR will increase risks to banks, by making it harder for them to hedge variability in their cost of funding related to their own credit risk. It is clearly very important for banks to be able to manage this risk. But, as we have seen, LIBOR is not the right tool, because it no longer accurately measures banks’ true cost of funding. And, even if it did, it is stretching credibility to suggest that the optimal place to house funding risk is with real economy borrowers. This feels a particularly fruitful area for innovation, drawing on the much more sophisticated range of tools now available for managing such risks.

Join the revolution! Why it makes business sense to move on from LIBOR  Speech given by Andrew Hauser, Executive Director, Markets  At Risk Live, London 27 June 2019  I am grateful to Wayne Leslie for his help in preparing this speech, and to Peter Balint, Rohan Churm, Tom Horn, Al Hughes, Antoine Lallour, Adeshini Naidoo, Will Parry, Edwin Schooling Latter, Jugvinder Singh, Tim Taylor and Francesca Zwolinksy for their advice and comments. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Introduction  There seem to be two rather distinct themes to your conference today:  The first is all about opportunity, the future, things you might want to do: fintech, AI, new tools and ways of working. All symbolised by a rather inspiring yellow lightbulb icon on your agenda:  The second is all about the grim stuff: black swans, operational risks, or whatever else might lurk in your ‘hall of horrors’ sessions later – and the things you have to do in response. I’m not 100% sure which camp this speech has been put in. But I think there’s a clue in the icon you’ve put next to my name in the programme – which is a revolutionary clenched fist… In one sense I understand why I’ve been given a pugnacious icon. The programme to move the market from LIBOR to risk-free rates is a huge undertaking. Its goal is vital, and simply stated: to eliminate the profound system-wide vulnerabilities posed by LIBOR. And the deadline is clear: end-2021.