samchain/econo-pairs-v1 huggingface dataset:
From a general point of view, volatility is a kind of genetic signature of the price setting mechanism in a competitive market. Prices hover around the equilibrium through successive adjustments. When market participants express widely different views on this equilibrium price, or when the volume of transaction shrinks, volatility usually increases. In this respect, there is a close correlation between the occurrence of crises - such as the revealed insolvency of an emerging country, supply shocks on commodity prices, bursting of equity bubbles - and excessive volatility. Volatility is not an indicator of market inefficiency. However, excessively high volatility has adverse effects on the behaviour of market participants and the real economy. From a corporate management point of view, volatility on capital markets lowers the predictability of the cost of capital. When reviewing investment opportunities, managers may want to avoid relying too heavily on external finance because of the uncertainties surrounding the cost, or even the sheer availability, of financing. This may lead companies to postpone or downsize investment projects. From a financial management point of view,  11  Estimation in “Central banks and financial stability - exploring an intermediate land” - Second ECB central banking conference - 2002. 12  BRI - Economic aspects of regional currency areas and the use of foreign currencies - 2002 - document non publié. BIS Review 2/2003  5  large investors may give priority to companies with a low risk profile, in order to bring back their own asset portfolios to levels of volatility matching their requirements.

The effective implementation of the acquis communautaire is not only a  8  BIS Review 2/2003  legal prerequisite for accession to the EU. It also implies the effective transformation of accession countries’ economic framework, which should facilitate their integration into the EU and, later, the euro area. In this context, it should be ensured that there is no discrepancy between the central banks’ formal status in the legislation and the implementation of that legislation. It is of utmost importance that all present and future Member States respect this economic and institutional ground rule of the European framework. –  Sixthly, let us not forget the present and future contribution of Central and Eastern European countries to the economic prosperity of Europe at large. It seems that this contribution might be sometimes underestimated, while the relative influence of the US economy, for instance, might be sometimes overestimated. In fact, transition economies, as a whole, are as important as the US in terms of external demand addressed to the euro area: they both enjoy the same share, i.e. 13% of our exports. And, during the last two years, transition economies contributed for two-thirds to the overall growth of our total external demand, while the US contributed for less than 0.1%. More generally speaking, Central and Eastern Europe countries are already major contributors to the overall growth on the European continent. In 2001, despite the international context, they remained at quite high a level of growth, around 2.8%.
They feared that if systemically important financial institutions were to suddenly fail, financial sector lending might collapse and the economy implode. So the sovereign money initiative, with its focus on payment transaction accounts, does not resolve the ‘too big to fail’ issue. Regulatory adjustments, of the kind that are already being implemented, offer a better solution. The Swiss sovereign money initiative would likewise have a number of problematic consequences for our monetary policy. The initiative requires that the SNB manage the money supply, an idea we abandoned some 20 years ago. Today, the SNB steers monetary conditions via money market rates, a strategy which has served it well over the years. A switch to monetary targeting would therefore be an unnecessary step backwards from our perspective. Another problem for monetary policy would arise from the mechanism for issuing sovereign money set out in the sovereign money initiative. Sovereign money would be created ‘debtfree’, rather than through the SNB’s market operations, i.e. purchasing securities or granting secured loans. It is by no means the case that the SNB’s monetary policy goals only ever require an increase in the money supply; they can also require a reduction, but it is far from clear how the money supply could be reduced if money were to enter circulation ‘debt-free’, as a sort of ‘gift’. Finally, a more general and significant objection to the sovereign money initiative is that the acceptance of the initiative would plunge the Swiss economy into a period of extreme uncertainty.

Yet we can assume that some households and companies would make use of the central bank’s offer and hold part or all of their deposits there. The resulting withdrawals of customer deposits at commercial banks associated with broader access to digital central bank money would impair the ability of the banking system to engage in liquidity and maturity transformation. Consequently, commercial banks would scale back liquidity and maturity transformation and thus the volume of their lending, rather like under the sovereign money scenario. In an extreme case, if customers were to transfer all of the sight deposits held at commercial banks to SNB sight deposit accounts, this would be tantamount to introducing sovereign money. Furthermore, granting broader access to sight deposit accounts at the central bank carries risks for financial stability. In periods of heightened uncertainty, the public would likely convert large amounts of their sight deposits at commercial banks into digital central bank money. Sight deposits with commercial banks can already be converted into central bank money today, namely into cash. However, holding cash is comparatively expensive and inconvenient. In a scenario where the public is granted access to digital central bank money, the SNB would probably have to provide the banks with liquidity (‘lender of last resort’) more frequently and on a larger scale than is the case today. In return, it would have to take assets of the banks and the associated risks onto its own balance sheet.
In July this year, the Committee met in joint session with this working group in Krakow, Poland to discuss, among other things, Basel II implementation issues. In addition, the AIG has encouraged non-G10 supervisory participation in working groups that are addressing issues related to validation and operational risk. The AIG has also engaged in encouraging work with non-G10 supervisors to consider principles for information sharing among home and host supervisors. I believe that this dialogue will, over time, foster greater consistency among Committee and non-Committee members. The Committee is therefore committed to heightening this dialogue and will consider further ways to promote consistency. Thank you very much, and I look forward to your questions and comments. 3/3

Nevertheless, the word “uniform” might sound a little strange to us today, when we prefer to use softer terms such as “convergence”. But of course Mr Delors was not thinking about uniformity of the services themselves, but rather about the need to ensure that they could be offered and accessed on an equal basis across the EU. But what it is remarkable is that Mr Delors was referring to the steps that should be taken in Stage One of EMU. He expected the integrated financial market to be in place at the beginning of the EMU process, before going to the subsequent stages. Almost seventeen years have passed since Stage One was launched. And we entered Stage Three almost eight years ago. EMU has proved to be a successful reality, but the single financial area as defined in the Delors Report has not yet been fully achieved. Of course, there has been impressive progress in some areas, for instance, the European money markets. And there has been good progress in others, like corporate bond markets and Government bond markets. In some fields, however, we are a long way from Mr Delors’ vision of integration. Looking at stock exchanges, for instance, we have certainly witnessed a decrease in the home country bias in investor portfolios. But the overall level of home country bias remains high, indicating that a significant degree of fragmentation remains. And progress has been very limited in the retail financial services sector, where the cross-border provision of services is still almost symbolic.
Different views on macroprudential tasks Judging by the consultation responses to the Financial Crisis Committee's partial report, opinions are relatively divided as to what role macroprudential policy should play with regard to the development the Riksbank has tried to manage in recent years. There is a possibility that excessive debt could result in a conspicuously weak macroeconomic development without any threat to the stability of the banking system. Some of those consulted consider that macroprudential policy does not have a role to play in reducing these types of risk, given that they do not present a clear threat to the stability of the banking system.21 With this type of solution monetary policy would not obtain the support from macroprudential policy needed to be relieved of "leaning against the wind". Indeed, my impression is that macroprudential policy is often assumed to focus on the stability of the banking system. This means that risks in the credit and housing markets that do not clearly threaten the banking system, but could nevertheless lead to major macroeconomic problems, would risk being overlooked. There is a lot that remains to be investigated and decided on before a practical framework for macroprudential policy is in place. My impression is that, compared with many other countries, we have if anything fallen a little behind.

Mr Svensson examines the period 1997-2011 and calculates that if inflation during this period had on average been 2 per cent instead of 1.4 per cent, unemployment would have been 0.8 percentage points lower. If the labour force is held constant, this corresponds to around 38,000 fewer unemployed. BIS central bankers’ speeches  3  been unemployed if the repo rate had been kept at the rate of 0.25 per cent, to which it was cut during the financial crisis, until today.4 I will return to this particular calculation later on. As I mentioned in my introduction, it is important to assess monetary policy and to analyse potential consequences of deviations from the inflation target. But one must also be aware of the impact of such analyses and that there is a clear risk that apparently exact figures will be regarded as concrete truths in the debate. All calculations of this nature are based on strong assumptions and are very uncertain, something that is easily forgotten or just ignored. Take the calculations that I mentioned earlier. Without going into detail, one can note that they only focus on what CPI inflation has been on average – the costs in terms of unnecessary unemployment have arisen solely because the average CPI inflation rate has been below 2 per cent. Supposedly, the idea is that this could have been avoided if the Riksbank had cut the repo rate more and brought inflation up to 2 per cent. But is this all there is to it?
13  Figure 3 GDP evolution (real annual change, percent)  3,5  3,5  3,0  Other  2,5 2,0  3,0 2,5 2,0  1,5  Total  1,5  1,0  1,0  0,5  0,5  0,0  0,0 14  15  16  Source: Central Bank of Chile. Figure 4 Other sectors (real annual change, percent)  8  Personal services  6  8 6  Trade  4 2  Construction  0  4 2 0  Manufacturing  -2  -2 Business services  -4 14  15  -4  16  Source: Central Bank of Chile. 14  Figure 5 Consumption  GFCF  (real annual change, percent)  (real annual change, percent)  8 8  8  20  Construction and other works  Durable  Non-durable  4 4  10  0  0 0  0  -4  -4-4  -10  4  Machinery & equipment (right axis)  -8  -8-8 14  15  16  -20 14  15  16  Source: Central Bank of Chile.

Heightened volatility in global financial markets can be associated with the presence of very low and even negative rates rather than the underlying macroeconomic and external imbalances. In these circumstances, any change in interest rate differential across countries is likely to create greater impacts than otherwise. If this interest rate change takes place in the largest and the most significant economy in the world, then the impact will expectedly be further magnified. The Fed’s start of interest rate normalization has demonstrated that its impact on the global economy and financial markets indeed has been large, giving rise to significant capital outflows from emerging market (EM) economies, large adjustments and volatility in exchange rates as well as widened EM spreads and interest rates. The adverse effects of the Fed’s interest rate normalization has been on average larger than those occurred in previous two financial turmoil episodes, namely the Eurozone sovereign debt crisis and the US tapering tantrum. However, the disparity between the effected countries has been large too. The plummeted commodity prices as well as other factors led to this outcome as commodity exporters suffered from both the lower commodity revenues and the tightening global financial conditions. Financial markets also differentiated EM countries by policy frameworks and prudent policies. Those having rich and better policy frameworks and prudent policies have withstood the recent global financial turmoil better than the others.
In general, it is helpful to conceptually distinguish financial-stability policy from monetary policy. Different economic policies, such as fiscal policy, monetary policy and labour market policy can be distinguished according to their objectives, the policy instruments that are suitable for achieving the relevant objectives, and the authority or authorities who control the instruments and are responsible for achieving the objectives. From this point of view, it is clear that monetary policy and financial-stability policy are very different, and understanding this distinction is important. Monetary policy, in the form of flexible inflation targeting, has the objective of stabilising inflation around the inflation target as well as resource utilisation around a normal level. Under normal circumstances, the suitable instruments are the policy rate and communication. In times of crisis, as we have seen during the current crisis, other more unconventional methods can be used, such as lending at a fixed interest rate at longer maturities, quantitative easing, and so on. Financial-stability policy has the objective of maintaining and promoting financial stability. Financial stability can be defined as a situation in which the financial system can fulfil its main functions of submitting payments, channelling saving into investment, and providing risk sharing without disruptions that have significant social costs. The available instruments are, under normal circumstances, supervision, regulation, and financial-stability reports with analyses and leading indicators that may provide early warnings of stability threats.

(2010a), “Inflation Targeting,” in Friedman, Benjamin M., and Michael Woodford, eds., Handbook of Monetary Economics, Volume 3, Elsevier, forthcoming, www.larseosvensson.net. Svensson, Lars E.O. (2010b), “Some Problems with Swedish Monetary Policy and Possible Solutions,” speech on November 24, 2010, www.larseosvensson.net. Svensson, Lars E.O. (2010c), “Why a Lower Repo Rate Path?”, speech on February 24, 2010, www.larseosvensson.net. White, William R. (2006), “Is Price Stability Enough?” BIS Working Paper No. 205, www.bis.org. Woodford, Michael (2007), “The Case for Forecast Targeting as a Monetary Policy Strategy”, Journal of Economic Perspectives, Fall 2007. Woodford, Michael (2010a), “Financial Intermediation and Macroeconomic Analysis”, working paper, Columbia University, www.columbia.edu/~mw2230. Woodford, Michael (2010b), “Inflation Targeting and Financial Stability,” in progress. 6  BIS central bankers’ speeches
Food price inflation edged higher to 14.1 per cent, as the past surge in the cost of energy and of other inputs for food production is still feeding through to consumer prices. Price pressures remain strong, partly because high energy costs are spreading throughout the economy. Inflation excluding energy and food remained at 5.2 per cent in January, with inflation for non-energy industrial goods rising to 6.9 per cent and  2/4  BIS - Central bankers' speeches  services inflation declining to 4.2 per cent. Other indicators of underlying inflation are also still high. Government measures to compensate households for high energy prices will dampen inflation in 2023 but are expected to raise inflation once they expire. At the same time, the scale of some of these measures depends on the evolution of energy prices and their expected contribution to inflation is particularly uncertain. Although supply bottlenecks are gradually easing, their delayed effects are still pushing up goods price inflation. The same holds true for the lifting of pandemic-related restrictions: while weakening, the effect of pent-up demand is still driving up prices, especially in the services sector. Wages are growing faster, supported by robust labour markets, with some catch-up to high inflation becoming the main theme in wage negotiations. At the same time, recent data on wage dynamics have been in line with the December Eurosystem staff projections. Most measures of longer-term inflation expectations currently stand at around two per cent, but these warrant continued monitoring.

And his British counterpart, John Maynard Keynes, proposed an International Clearing Union with penalties on large surpluses or deficits (his suggestion of a new currency, the bancor, was included primarily because at the time national currencies were not convertible). His aim was to ensure symmetric obligations. As he wrote in 1941, “[T]he social strain of an adjustment downwards is much greater than that of an adjustment upwards. And besides this, the process of adjustment is compulsory for the debtor and voluntary for the creditor. If the creditor does not choose to make, or allow, his share of the adjustment, he suffers no inconvenience. For  BIS central bankers’ speeches  3  whilst a country’s reserve cannot fall below zero, there is no ceiling which sets an upper limit. The same is true if international loans are to be the means of adjustment. The debtor must borrow; the creditor is under no such compulsion”. And ever since then, the absence of an effective symmetric framework of obligations on both debtor and creditor countries has led to periodic crises. The obstacle to the creation of a binding framework is clear. Governments know whether they are debtors or creditors today. So a framework that has economic and indeed moral force when seen from behind the “veil of ignorance”, as suggested by John Rawls, is unlikely to appeal to governments.
Lars Nyberg: Some Swedish experiences with financial stability surveillance Speech by Mr Lars Nyberg, Deputy Governor of Sveriges Riksbank, at the Bank Indonesia, Jakarta, 10 December 2003. *  *  *  Introduction First of all I want to express my thanks to the Bank of Indonesia for inviting me to this conference. Financial stability - or the lack of it - is a very topical subject in the light of events in the past decades. Furthermore, financial stability issues seem to be strikingly similar between countries, whether they are big or small. It makes good sense, therefore, to have different central banks talk about their experiences. And, as always, the best experience comes from mistakes made. With this in mind, I shall tell you a little of how we in Sweden look at stability surveillance today. First, some background. Systemic stability came under serious threat during the Swedish banking crisis at the beginning of the 1990s. As was later the case in Indonesia, the risk of severe financial instability led to government intervention. A decision at very short notice was required of Sweden’s government and parliament in the autumn of 1992: Should they choose to support Swedish banks financially without really knowing how expensive the support might have to be, or should they risk a financial crisis with unforeseeable consequences for the Swedish economy? The decision that was taken was the only reasonable option - to rescue the Swedish banks.

Factors which might influence banks simultaneously are in focus, for instance the emergence and bursting of financial bubbles, excessive debt leverage in a certain economic sector or structural changes leading to reduced revenues or increased risks. The purpose is to identify conceivable risks and present an analysis that will influence the behaviour of market participants. A first and very relevant question is whether a stability report really would help to prevent a crisis. Will the financial sector read and listen to what the central bank has to say? Will this kind of moral suasion be sufficient? Could we have written a report in the late 1980s that would have made the banks see what they did not see? We do not know. But at least as long as managements have a memory of the last crisis, they are likely to listen. And if the crisis develops slowly, there are certainly things to be done. I shall return to this question when I talk about crisis management. Let me now turn to the main elements of a stability report as I see them. First, we look at the banks’ borrowers, because as long as they are healthy the banks usually are as well. Borrowers are analysed in terms of the corporate and household sectors in general, with particular reference to levels of debt and the future ability to pay. The real-estate sector is considered separately because lending to this sector is in most countries a major part of banks’ total lending.