samchain/econo-pairs-v1 huggingface dataset:
Monetary conditions are almost identical: three and six months Libor and Euribor rates do not differ by more than 50 basis points. I strongly believe that those three features – speed, innovation and cooperation – allowed central banks to play a decisive part in containing the crisis and limiting its impact. Has the crisis changed our vision of central banking? The credit bubble has already extracted heavy costs on our economies and the welfare of our citizens. All must be done to avoid the repetition of such developments. Bubbles are however complex phenomena: hard to detect, hard to prevent, hard to fight. Can we do better in the future and what contribution can central banks bring ? The crisis has revived the old, but ongoing, debate on whether monetary policy should aim, or not, at ensuring financial stability in parallel to its main objective of price stability. The arguments are well known, on both sides. New ideas are being brought, regarding, in particular, the impact of monetary policy on overall maturity transformation and leverage inside the financial system. It is desirable and healthy that this discussion takes place. Let me give you my own reflexion, at this stage: •  The primary and dominant objective of monetary policy should remain price stability. Any dilution of this fundamental mandate would be take us back three decades and be extremely detrimental to our welfare and prosperity in the long run. •  Without prejudice to this primary objective, all mandates allow for consideration of other objectives.

Central banks' response to the crisis History taught us that banking crises degenerate into deep and lasting depressions unless they are dealt with quickly and forcefully. Those lessons were not lost on both fiscal and monetary authorities and the policy response worldwide has, indeed, been exceptional by any historical standard. I would like to focus here on three characteristics of central banks interventions •  First, they have been fast and decisive. Indeed, the start of the crisis can be dated back to August 9 2007, when the Eurosystem provided up to 95 billion euros in exceptional liquidity support to the interbank market. As the crisis developed, those interventions multiplied and evolved, a point to which I will return shortly. The deterioration of the real economy and subsequent easing of inflationary pressures opened room for a substantial relaxation of the monetary policy stance. In the euro area, seven reductions in policy rates brought the interest rate on our main refinancing operations from 4.25% in October 2008 to 1% today. •  Second, those interventions have been flexible and highly innovative. Central banks saw as their mission to avoid the paralysis of financial intermediation and keep the monetary transmission mechanisms working efficiently. To achieve those objectives, they considerably expanded and diversified their tools and instruments. In countries where markets play an important role in the allocation of credit, they created numerous new facilities to provide financing and to lower spreads through the purchase of private and public debt securities.
Three, the focus on debt sustainability also makes it possible to include previously missing elements (specifically the macroeconomic environment, in addition to potential growth and the natural interest rate) that can encourage structural reforms. Finally, it allows for greater cross-country heterogeneity in the targets and for the design of fiscal consolidation. Allow me to elaborate a little more on these elements. In my view, which is consistent with that expressed by a number of academics and by the Eurosystem 6, the new framework should reflect a number of principles.7 First, it should take into account the economic transformations that have taken place over recent decades, including the sharp increase in public debt. The persistence of some of these, such as the fall in the natural rate of interest and in potential output, has, however, been challenged by a series of major shocks in recent years. At the same time, the new rules need to accommodate a greater degree of cross-country heterogeneity. In this regard, as I have said before, the Commission’s orientations include country-specific expenditure targets, which could incorporate the differences in potential growth and interest rates into the debt sustainability analysis framework. In any event, the devil is in the details. While this is in principle desirable, the key aspect is how the deadlines for the necessary fiscal adjustment are calibrated. The credibility of the fiscal framework could be endangered if the deadlines are too lengthy or if the adjustment is backloaded.

In turn, the stabilising arm of the autonomous national fiscal policies was tasked with addressing idiosyncratic shocks and cyclical slippages, while guaranteeing fiscal sustainability. However, the independent conduct of fiscal policy in a monetary union has inherent externalities that warrant some constraints. The EMU was built on the basis of placing full responsibility for fiscal policy decision-making and implementation on the governments of the individual Member States, without interfering with the conduct of monetary policy. In this sense, the independence of the central bank was reinforced by two means: i) the prohibition of monetary financing and ii) a virtuous conduct of fiscal policy to avoid calling into question the independence of the monetary authority. The consequences of fiscal actions were thus the sole responsibility of the individual Member States. For this reason, a “no bail-out clause” was included in the Treaty. The main objective of this clause was that financial markets should play a disciplining role by requiring different risk premia according to the underlying fiscal fundamentals. At the same time, limits were set to the deficit and public debt of the Member States that where later complemented by the provisions of the Stability and Growth Pact (SGP). There were two additional reasons for this. The first is that financial markets could not always be trusted to act as a deterrent against unsound policies.
Further, as a means of recognising the processes of financial innovation, consideration should be given to the adoption of a more flexible treatment of the characteristics of the so-called innovative instruments in tier 1, which are basically preferential equity holdings with a step-up in remuneration after 10 years, not currently accepted as tier 1 capital by the Banco de España. This option should, in any event, be accompanied by a decrease in the weight of preferential equity holdings from the present 30% to 15%, in order to heighten the importance of the basic components of tier 1 capital, namely ordinary shares and reserves. Moving on to regulatory developments, 2004 was a particularly eventful and, to tell the truth, difficult and complex year. It saw two projects with a direct impact on credit institutions: the IFRS (International Financial Reporting Standards) and the New Capital Accord, or Basel II. The European Union decided that from January 2005 the consolidated accounts of groups with securities quoted on any regulated market in the EU have to be prepared using international accounting standards (IAS). Its aim in doing this was to assist the growing integration of the European single market by ensuring that investors have access to financial information with the highest possible level of homogeneity. In addition, the international financial system is strengthened, since the plurinational nature of IAS facilitates the convergence of these standards with those of the US.

Compared with the anomalous situation at present, in which these flows are from the latter countries to the former ones, owing to the combined impact of the absorption exerted by the US economy and the exchange-rate policies in Asia, a smoother working of the world economy should channel surplus saving from the more mature economies to those where the return on capital is higher, as they are at a more incipient phase of development. It should be recalled that many of the achievements of the world economy in recent years, such as moving on to a high, inflation-free growth path and infusing the emerging areas with greater dynamism so as to allow them to achieve standards of living closer to those of the richer countries, are a direct or  2  BIS Review 45/2005  indirect consequence of growing worldwide integration. Globalisation has thus given most countries more fluid access to foreign markets while offering them incentives to concentrate on those industries in which their comparative advantage lies, and it has provided consumers with a wider range of products at more favourable prices. But it should not be forgotten that the rigidity of certain countries’ exchange-rate policies has ultimately triggered protectionist threats in others that see themselves as adversely affected. It is thus vital not to succumb to these protectionist temptations and to persevere with the liberalisation of international trade so that the trends which have allowed the world economy to achieve its recent favourable results may become entrenched.
Although the formal guidelines may vary slightly from country to country, I believe it is correct to say that all central banks with an inflation target conduct flexible inflation targeting, that is, they give some consideration to real economic activity. In other words, we are not "inflation nutters” to borrow Mervyn King’s famous expression. Our aim is not in all situations to bring inflation back on target as quickly as possible and at any cost. At the same time, the flexibility is part of our means of conducting monetary policy, which has gradually changed during the period with an inflation target. It is also natural as this type of flexible application of monetary policy assumes that there is considerable confidence in the inflation target – confidence that must first be won. Immediately after the introduction of the inflation target in 1993, there was little confidence in either monetary policy or fiscal policy. Because of this, there was limited scope for giving consideration to the real economy. The Riksbank’s rhetoric and probably also the actual policy were mainly focused on developments in inflation. The underlying factor behind this was probably concern over credibility problems. However, from the mid-1990s the stability of the real economy has gained ground, and the Riksbank has in various ways tried to make clear that we give consideration to developments in production and employment. Let me also say something in this context about risks. More specifically, risks linked to rising asset prices and credit expansion.

In such situations, it is usually argued that the best strategy is to try to avoid the worst outcomes, as we have done in preparing for a no-deal Brexit. And sometimes you need to be bold to avoid truly bad outcomes, exactly as Mario Draghi did when he said that the Eurosystem would do “whatever it takes”. Third, how should we respond to uncertainty about structural relationships? Uncertainty about the transmission mechanism is often used to justify acting gradually. Sometimes described as “tiptoeing in a dark room”, a central banker following the Brainard principle attenuates his response to inflationary shocks if he is uncertain about the precise sensitivity of inflation to monetary policy. But the more cautious he is in the first step, the more ready he should be to take several additional steps: gradualism is not inaction. Structural shifts in the economy are also constantly changing economic dynamics and equilibrium relationships, such as r* (the natural rate of interest) and u* (the natural rate of unemployment). But as John Williams of the New York Fed has pointed out, these stars are today more a fuzzy blur than a single bright point of light. So whilst they can help with the broad orientation of monetary policy, uncertainty about these stars is too wide to permit precise navigation. Overall, therefore, the theoretical guidance on how to respond to uncertainty is itself open, to say the least.
It is thus also in the interest of the central banks to do what they can in various ways to avoid a situation where the economy goes into recession because of a burst bubble. The costs of the most recent financial crisis have been so high that it is difficult to claim that there would not have been any potential gains in preventing the financial bubble from arising. I mentioned at the beginning of my speech that the most recent financial turbulence is the greatest since the Depression and that the downturn in the world economy is the largest since the Second World War. Unemployment in the United States, for instance, has risen from around 4 per cent to more than 10 per cent in just over two years. The percentage of US households experiencing payment problems is the largest ever noted and millions of households have been forced – and probably further millions of households will be forced – to hand over their home to the lender for compulsory sale. In Sweden unemployment has risen much less during the same period, but it is now at just over 8 per cent, the highest level noted for more than 10 years. A further argument in favour of central banks preventing excesses in asset prices is the risk of what is known as moral hazard.

When such banks got into difficulties, the states in question had no option but to rescue them. 2 This has become known as the ‘too big to fail’ issue. International measures to strengthen financial stability  In the aftermath of the crisis, the relevant international bodies defined new standards and revised existing regulations to strengthen financial stability. In December last year, for example, the Basel Committee on Banking Supervision finalised the Basel III international regulatory framework for banks. Prior to that, the Financial Stability Board (FSB) had already adopted new rules to address the ‘too big to fail’ issue. These regulatory approaches have tackled the weaknesses that were uncovered. An initial set of measures sought to strengthen the resilience of all banks, with more effective rules being issued with regard to liquidity and capital adequacy. The new liquidity standards ensure that banks can absorb exceptionally high outflows of funds over a period of 30 days, and that they have sufficient amounts of stable funds to finance their activities for the next twelve months. 3 The capital requirements were amended in two respects. First, deficiencies in the riskweighted capital ratio (that is to say, the ratio between capital and risk-weighted assets) were remedied; the changes restrict the banks’ scope in calculating their risk-weighted assets. 4 Second, a non-risk-based measure was added to the capital requirement. I would like to look at this briefly now. In making business decisions, for example when granting a loan, banks have to weigh up risk and return.
Despite steps forward through enhanced disclosure and improved accounting standards, there have been other steps back towards opacity: the result of the sheer complexity, speed of movement of risks, and in some cases obfuscation through special purpose vehicles, or other offbalance sheet devices. Another implication of the derivatised world is the premium it places on risk management. The deployment of intellectual capital in finding new opportunities to create and disperse risk has been prodigious. This in turn places a real burden on the managers of the great array of risks and interdependencies and on those supervising the entities that take them. A particular feature of these risk management processes is the reliance on modelling techniques. Although when used judiciously models are a valuable tool, they also have limitations and contain hazards when in the wrong hands. First, they are only as good as the assumptions on which they are based. And second, hazards exist where models can provide a false reassurance that liquidity to deliver assumed value will be available. This leads to the question of measurement and accounting for values and risks. Inherited systems of accounting - with historic cost conventions for banking and insurance - bring real tensions in today’s world. There is understandable concern regarding the added volatility which the developing Fair Value techniques can give rise to, in relation to reported earnings and disclosed values.

François Villeroy de Galhau: France and Germany facing European challenges in the crisis Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Berlin Academy, Berlin, 10 September 2020. * * * Ambassador Descôtes Professors Schwan, Göring, Kaplan, Ladies and gentlemen, I am very pleased to be with you today, despite the obstacles related to Covid. The Berlin Academy is one of the essential forums where Franco-German relations, which are at the heart of the European project, can be deepened over time. I am completely convinced of this. I am French, but my family's roots are in Saarland. My family has lived there since the end of the 18th century and its ceramics manufacturing company Villeroy & Boch is part of the German “Mittelstand”. I love Germany, its language and its culture. I've always been struck by a difference in terminology: the French speak, as romantics, of the Franco-German "couple", and the Germans speak as engineers and use the term “engine”. But let’s set clichés aside: France also has excellent engineers, and romanticism was also born in Germany with Goethe, and Schiller. And above let’s all see the common reality.
Of course one should not exaggerate the importance of individual appointments of this kind. But they do help to create a climate of co-operation, and give a signal to the respective staffs of the two institutions that they are expected to work together as closely as possible, and a signal to the outside that they can expect this to happen. The Approach to Regulation in the UK The discussion of regulatory approaches is often phrased in terms of rules versus judgement or, as academics tend to put it, rules versus discretion. Should supervisors simply set  BIS Review 21/1997  -8-  the rules, and shoot those who break them? Or does that create too rigid a framework, one which stifles initiative and imagination? There is no simple answer. The Bank of England imposes an increasing number of rules: it has, for example, implemented detailed regimes for capital adequacy introduced by the Basle Committee and the European Union. We set capital requirements to cover the more readily quantifiable risks; we enforce limits on banks’ large exposures to individual counterparties; we have rules on banks’ liquidity; and we seek to ensure that banks have robust systems and controls, as well as management with the skill and integrity to ensure, in that delightful US phrase, that the bank is ‘safe and sound’. But our judgmental approach - allowing supervisors the discretion to exercise informed judgement within approved guidelines - still contrasts with that of many other regulators.

There is nothing to say this would be the case, neither in the Sveriges Riksbank Act or its preparatory works, nor in the booklet “Monetary policy in Sweden”. Instead, I believe that the repo rate should in all situations be set so that inflation and resource utilisation are stabilised as far as possible, regardless of whether this requires a high or a low repo rate and regardless of whether there is a crisis or not. A repo rate path way above market expectations The repo rate path is much higher than market expectations according to implied forward rates. The repo rate path corresponds to much higher market rates than the current ones. If the repo rate path were to become credible, it would lead to a significant increase in long interest rates and a large appreciation in the Swedish krona, which would risk strangling the recovery in exports and GDP, raising unemployment and lowering inflation. The reasoning can be explained with the aid of some figures. In Figure 7 the red curve shows the repo rate path in the main scenario, and the blue curve shows implied forward rates according to Swedish market rates. The curves gave been extrapolated beyond the usual three-year horizon, to a five-year horizon. 6 Figure 8 shows the yield curves corresponding to the curves in Figure 7. The yield curves show short and long interest rates, more precisely a zero coupon rate as a function of maturity according to the horizontal axis.
Rosthom Fadli: IMFC Statement Statement by Mr Rosthom Fadli, Governor of the Bank of Algeria, on behalf of the Islamic Republic of Afghanistan, Algeria, Ghana, Islamic Republic of Iran, Libya, Morocco, Pakistan and Tunisia, at the forty-third meeting of the International Monetary and Financial Committee, Virtual IMF Spring Meetings, Washington DC, 8 April 2021. * * * The COVID-19 crisis has taken a heavy economic toll and caused tragic loss of lives and immense human suffering. No country has been spared. The synchronized, forceful, and timely global policy response prevented a worse outcome, but the damage has been still very significant and widespread. The recovery is gaining momentum, though its course and pace are highly dependent on the dynamics of the pandemic. The pandemic’s long term scarring effects are also still uncertain. The crisis has exacted a heavy toll on the low-income countries (LICs), in many cases reversing, in a matter of few short months, their hard-earned gains achieved over decades in alleviating poverty and improving social conditions. The vulnerable groups—youth, women, low skill labor and workers in the informal sector—have been hardest hit. The crisis has pushed millions of people into extreme poverty and severe food insecurity in addition to millions already suffering. Saving lives is still the highest priority. Multiple waves of the virus and its still uncontrolled spread in some regions pose serious threats to the global fight against the pandemic and further loss of lives.

The oil importing countries in our constituency continue to face large fiscal and external imbalances and soaring public debt, although an upside surprise in remittance inflows has provided some relief. The recovery of the LICs, most already beset by fragilities, is further constrained by the lack of fiscal space, elevated debt levels, declining aid and limited access to financing. While welcoming the ongoing international efforts to assist the LICs, including through debt service relief from the IMF and the World Bank and the G20-led DSSI, we strongly believe that a broader international participation, including by private creditors, is critical given the LIC’s debt vulnerabilities and the uncertainties that threaten their medium-term economic viability. The fragile states and countries afflicted by conflict and those hosting refugees in the MENAP+ region deserve close attention and timely and commensurate response by the international community. 1/2  BIS central bankers' speeches  The IMF’s nimble and proportional response to the crisis, including through an expansion of its toolkit and higher access limits, provided a critical lifeline for members facing large financing needs. The crisis is still evolving and there is still need for emergency support. The requests of some 40 members are still pending, including that of a major country in our constituency. In this regard, we would like to reiterate our call on the Fund to ensure that its financial support, policy advice, and capacity development are available to all members in an evenhanded manner without exception.