samchain/econo-pairs-v1 huggingface dataset:
Interconnectedness This financial crisis has exposed how important the interconnections are among the banking system, capital markets, and payment and settlement systems. For example, the recent disruption in the functioning of the securitization markets caused by the poor performance of highly-rated debt securities, led to significant problems for major financial institutions. Banks had to take assets back on their books; backstop lines of credit were triggered; and banks could no longer securitize loans, increasing the pressure on their balance sheets. This  BIS Review 125/2009  1  reduced credit availability, which increased the downward pressure on economic activity, which caused asset values to decline further, increasing the degree of stress in the financial system. This interconnectedness implies that regulation and risk management practices that focus only on individual parts of the system will inevitably fail to address important vulnerabilities elsewhere. Thus, we have to make widespread changes in how we approach supervision and regulation, particularly in the context of our most systemically important financial institutions. First, although supervision cannot lose its vertical perspective, looking firm by firm or region by region, it also must place more emphasis than before on gaining a horizontal perspective – looking broadly across banks, securities firms and other types of financial institutions, and across markets and geographies. Second, the supervision of our financial institutions and the regulation of markets need to be risk focused, coordinated and multi-disciplinary.

Critical infrastructure such as transport, water, power and telecommunications systems are also likely to be affected. Nearly all aspects of the economy in every country are therefore potentially at risk because of the widespread dependence on a country’s core infrastructure. The unprecedented scope of the Year 2000 problem means that a critical aspect of the issue is the management challenge. Substantial management resources are needed to coordinate the efforts to assess, repair, and test affected systems prior to the fixed deadline of BIS Review 85/1998  -2-  January 1, 2000. At the Federal Reserve, for example, we have created a number of management positions within our organization that are focused exclusively on different aspects of our Year 2000 preparations. A final point that underscores the need for urgent and sustained action is the increasing focus on the issue by the media, by the public and by market observers such as the rating agencies. Over the course of 1999, the extent of Year 2000 preparations by financial organizations will become the subject of ever more intensive scrutiny. As supervisors, therefore, we must do all we can to support the efforts of market participants to address the problem effectively, and to build confidence among others that this is being accomplished. While we must make it clear that supervisors cannot solve the problem, we can help mobilize others to take the necessary steps.
Durmuş Yilmaz: Press conference for the presentation of the Inflation Report Press conference by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the presentation of the Inflation Report, Ankara, 29 April 2010. *  *  *  Distinguished Guests and Members of the Press, Welcome to the press conference held to convey the main messages of the April 2010 Inflation Report, one of the most important communication tools of the inflation-targeting regime of the Central Bank. The report typically summarizes the economic framework addressed in monetary policy decisions, elaborates global and domestic macroeconomic developments and presents the medium-term inflation forecasts, which have been revised in view of previous quarter developments, along with the monetary policy stance. Before moving on to the Central Bank’s assessments on the inflation outlook and economic activity, which I will share with you in detail shortly, I would like to summarize the current global conditions. The recovery in global economic activity and the normalization of the international financial system have continued during the first quarter of 2010 (Figure 1). However, distressing levels of government debt, lingering problems across credit markets, and high levels of unemployment rates, all suggest that completely resolving problems across developed economies is not likely over the near term (Figure 2). Although the recovery across developing economies seems to be stronger, ongoing problems across developed economies – with their prominent role in global trade – still create downside risks for developing economies.

Capital adequacy indicators in Romania and the EU (average) 20  Figure 10. Stress test results for credit institutions (September 2017)  percent  10  19  percent  0  18 -10 17 -20  16 15  -30  14 -40  total capital ratio Tier 1 capital ratio total capital ratio – EU average Tier 1 capital ratio – EU average Source: NBR, EBA  -50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28  Sep. 17  Jun. 17  Mar. 17  Dec. 16  Sep. 16  Jun. 16  Mar. 16  Dec. 15  Sep. 15  Jun. 15  Mar. 15  Dec. 14  13  potential impact on own funds median value of impact impact at system level Source: NBR 8  Figure 11. Value of LCR* (September 2017) percent  percent  Figure 12.
With a zero interest rate, households, firms and authorities become indifferent about the choice of whether to hold securities such as treasury bills and bonds or to hold cash. 2 A so-called open market operation in which the central bank increases the monetary base and thus liquidity by buying treasury bills and bonds and paying with cash, then becomes ineffective in the sense that the interest rate is still zero and the only thing that happens is that households, firms and authorities hold more cash and fewer Treasury bills and bonds. A situation with a zero interest rate is therefore also called a liquidity trap. The issue of monetary policy when the interest rate is zero has become topical again. Since the autumn of last year, the outlook for the global economy has deteriorated further. At the same time as forecasts for inflation and growth have been revised downwards, policy rates  1  For more information on these measures, see www.riksbank.se. 2  This applies when the amount of cash held does not fall below the level needed for transaction purposes. BIS Review 19/2009  1  have been lowered and are now approaching zero in several countries. In December last year, the Federal Reserve, for example, cut its policy rate to an interval between 0–0.25 per cent, while in Japan the policy rate is 0.1 per cent and in Switzerland 0.5 per cent. Inflation throughout the world is also falling rapidly.

It is thus necessary to keep watch on inflation expectations, to counteract expectations of falling inflation, and preferably to create expectations of higher inflation. In this type of situation it may be desirable to create expectations that actually exceed the inflation target. The Riksbank’s current regime, with a credible inflation target and the publication of forecasts, including their motivation, for inflation, the real economy and the repo rate, provides a very good base for maintaining confidence in monetary policy, for upholding inflation expectations and preventing them from falling too low, or even from falling unchecked. If, contrary to expectations, this should not prove sufficient, and inflation expectations were to threaten to become too low, it is possible that tightening the inflation target, in the form of a temporary target for prices, might work better. This type of temporary price target could be introduced in the form of an average inflation target, so that inflation over the coming five years should on average be 2 per cent. If inflation then falls below 2 per cent during a period of time, it must be kept above 2 per cent during a period of time to ensure the average will be 2 per cent. With a well-motivated average inflation target it may be easier to justify this monetary policy and to create confidence in allowing inflation to exceed 2 per cent during a period of time in order to provide a sufficiently low real interest rate.
Financial Times: And what about temporary suspension of membership or even expulsion of a member that is systematically breaching this...? Jean-Claude Trichet: No, I don’t call for expelling members, but a temporary suspension of voting rights is something that should be explored. Financial Times: In retrospect, shouldn’t Europe have undertaken bank stress test earlier? Jean-Claude Trichet: I think so. The ECB and the Bank of England were very much in favour of this stress test. Of course, we have a very complex institutional environment, involving cooperation in real time among 27 EU capitals. It was really essential to have this exercise undertaken on a unified basis, simultaneously. You know that we particularly welcomed the detailed publication of the results for the 91 banks involved. Financial Times: Are you worried about deflation in Europe? Jean-Claude Trichet: No, I do not see the materialisation of a risk of deflation, or either of inflation, at present. We went through the heat of the crisis without any materialisation of deflationary risks. Our successful and solid anchoring of inflation expectations has protected us, I trust, very well against the materialisation of inflation risks – but also against the materialisation of deflation risks. Financial Times: And what about deflation in the United States, is that different? Jean-Claude Trichet: I fully rely upon the analysis of the Federal Reserve. Financial Times: But how serious do you think is the present weakness of the American economy?

Jean-Claude Trichet: I would say, again, that I rely very much upon the Fed’s analysis, which I have to say over the crisis has been wise and pertinent. There was a level of hype at certain moments, when we were getting out of the crisis, which perhaps did not fully reflect the situation of the real economy. And now there is a mood which seems to me too negative. That’s my own personal feeling. Financial Times: Let’s talk about the pace of financial reform, regulation. Why were the reforms as proposed under Basel III watered down? Jean-Claude Trichet: I do not want to prejudge in any respect the upcoming meeting we have on this issue. I will only say that we need the same rules at the global level, a level playing field globally. And now at the global level we have the full participation of the emerging world, which, by the way, is one of the major structural transformations of global governance over the last three years. The G20 has substituted for the G7 as the premier forum for international economic cooperation. We have also profoundly transformed the global governance of central bank cooperation with full ownership by the central banks from emerging economies. That is something which I would call a “silent revolution” in global governance.
6  In the April 2010 quarterly Industrial Trends Survey, 62% of manufacturers reported that they were working below capacity. The average figure for the decade 1998–2007 was 61%. BIS Review 99/2010  7  Chart 6: UK, US and Euro Area inflation rates Annual percentage increase in consumer prices 4 2003-07 Average 2008 - 10 Average May 2010  3  2  1  0 UK  US  Euro Area  Source: Office for National Statistics, Thomson Datastream  One obvious reason for this higher level of UK inflation is the weakness of the pound. Since mid-2007, the pound has lost nearly a fifth of its value against the euro and has fallen by around 25% against the dollar. Indeed, as Chart 7 shows, looking back over the last three years, the pound has been the weakest currency in the whole G20 group of currencies, declining more against the US dollar than the Argentine Peso and the Turkish Lira.

Chart 4: BCC survey activity indicators Balance reporting increased sales/deliveries 60 Services  Manufacturing 40 20 0 -20 -40 -60  Mar-07  Sep-07  Mar-08  Sep-08  Mar-09  Sep-09  Mar-10  Note: Sales/deliveries relate to domestic market Source: British Chambers of Commerce (BCC)  BIS Review 99/2010  5  The CBI’s most recent surveys show a similar picture, with manufacturing industry bouncing back strongly alongside a muted recovery in the services sector (see Chart 5). According to the CBI, retail sales growth appears to have been weak in the last couple of months – though this may reflect some temporary uncertainties relating to the change of government and the Budget, which could have affected consumer confidence and spending patterns. Chart 5: CBI survey activity indicators Balance reporting/expecting increased sales/output 40 Manufacturers output expectations  30  Retail sales  20 10 0 -10 -20 -30 -40 -50 -60  2007  2007  2008  2008  2009  2009  2010  Note: Retail sales – percentage balance reporting annual increase (3 month average); Manufacturing output – percentage balance expecting rise in the next 3 months. Source: CBI Monthly Trends Enquiry and Distributive Trades Survey  I would not want to play down the uncertainties which remain in relation to the growth outlook here in the UK. Access to credit is still being adversely affected by the problems in the banking system.
operational inefficiency, poorly designed accounting practices, legal uncertainty and inadequate supervision, can degrade the performance of national as well as regional financial markets, frustrate exporters, importers and businesses. Further, these conditions can lead to dramatic manifestations of inefficiency and abuse, and challenge the credibility of the central banks in our countries. When the SAARC region trade and investment flows increase, we will not be able to reform the clearing mechanism urgently to accommodate cross border flows. The ACU has reached crossroads, requiring urgent reforms, if member countries are still interested in maintaining the long-established goodwill and regional cooperation through it. 4  BIS Review 79/2007  6. Outline of a policy framework  It is hard to come up with a blue print or reference framework for establishing a regional payments group without deliberating the topic with the SAARC member central banks. Nevertheless, I wish to outline the key elements of such a framework and a road map which can be developed further by task forces or a working group appointed for the purpose. First and foremost, it is necessary to get the commitment and consent of central banks in forming the regional payment initiative. Second, it is necessary to engage in a stocktaking exercise to gauge the effectiveness and appropriateness of the existing payment instruments, payment systems, clearing mechanisms, settlement systems and infrastructure in the region to identify their weaknesses, inefficiencies, safety levels and risks.

The current move through SEPA is to establish an integrated non-cash payments system throughout the Union. This means that individuals, banks and financial institutions, corporations and all other entities in the Euro region will be able to make cashless payments throughout the Euro area from a single payment account anywhere, from any country, using a single set of payment instruments, easily, efficiently and safely on the same way that they make payments at the national level. 4. Lessons learned  It is worth mentioning some of the challenges and problems encountered in the SEPA process in order to avoid similar problems that may come up in establishing a SAARC payment initiative, or to remember them if and when SAARC countries wish to move towards a single payment area at a future date. It also highlights the need for a committed leadership when undertaking sophisticated region-wide projects like SEPA. From the beginning, when the SEPA policy framework was set by the authorities in the EU area, it was shared with the market led by banks and financial institutions which were entrusted to implement it. However, due to lack of high-level commitment, the difficulties encountered in the coordination of the diverse interests of the banking and financial service industry and the severe competition among service providers have caused delays in implementing this project.
According to Norges Bank’s assessment, with an interest rate of 2.5 per cent, the probability that inflation two years ahead will be higher than 2½ per cent is the same as the probability that it will be lower. Thank you for your attention. BIS Review 43/2003  5

It is perhaps a little harsh – it clearly misses some of the important strengths that still underpin the Irish economy and which will be crucial components of the recovery in the years to come. Yet we can see many elements of the Irish situation in the years 2007 and 2008 in that description. Lacking competitiveness: clearly, wages and prices had risen much too fast since the start of monetary union. From 2000 until 2008 wages (compensation per employee) in Ireland increased on average by nearly 6% per year, more than twice the rate seen in the euro area. This eroded Ireland’s competitive position. Unit labour costs had risen by 50% between 1998 and 2008 while they had risen by only 19% in the euro area during the same time. Unfit, in various aspects of its national economic and especially supervisory policies. All of this made it not well equipped to counteract the emerging imbalances at an early stage and to match the challenges facing the economy when the crisis took hold. Ireland’s current account deficit was 5.3% in 2007 and accounted for 5.6% in 2008. And certainly overweight, in some sectors at least. Ballooning credit and spending excesses had overheated the economy and misdirected resources. In 2007 Ireland was an economy that had become dangerously dependent on construction and housing as a source of economic growth and tax revenue. Overly optimistic expectations both in the private and the public sector played a major role.
If the banks also obtain a large share of their financing on the markets – as the Swedish banks do – then a crisis of confidence in an individual bank or the entire banking sector, or the economy as a whole, could also lead to the funding  5 [12]  being withdrawn, especially if the foreign share of the funding was substantial. This could also lead to acute liquidity problems for one or more banks. In other words, in a crisis, liquid funds are often in short supply. The financial markets that offer funding often function less well than usual and the declining confidence between the market participants means that the liquidity that is still available in the financial system is not redistributed in the same way as under more normal circumstances. So why have the central banks been given this liquidity supporting role? The simple reason is that they – through their right to create money – have unlimited opportunities to provide liquidity in the national currency. This opportunity is essential when managing a financial crisis. As the banks’ operations have become increasingly internationalised and their need for international securities markets has increased, however, the need to also offer liquidity assistance in other currencies has increased. But the Riksbank, like other central banks, has limited possibility to lend foreign currency. Here the central banks – for natural reasons – do not have any possibility to create liquidity.

Øystein Olsen: The conduct of monetary policy Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 19 May 2020. * * * Accompanying slides of the speech. Please note that the text below may differ from the actual presentation. When I appeared at the hearing before this Committee this time last year, the Norwegian economy was growing at a solid pace and the policy rate was on the rise. The policy rate was raised three times in 2019, from 0.75 percent to 1.50 percent. There was no longer any need for low interest rates to support economic activity. After several years of solid economic growth and falling unemployment, capacity utilisation was assessed to be somewhat above a normal level in 2019. Inflation was close to the 2 percent target. GDP growth slowed through autumn, and towards the end of 2019 the Norwegian economy was assessed to be close to the peak of the business cycle. There were prospects that the policy rate would remain close to 1.50 percent ahead, inflation would continue to be close to the inflation target and unemployment would remain low. We envisaged that growth would slow in the years ahead, partly as a result of weaker prospects for petroleum investment.
However, I cannot affirm that the resolution of market imbalances would result in a reduction of volatility to levels that prevailed before these imbalances were taken into account by market participants. In my view one should not underestimate the part played by technical factors in the persistence of volatility peaks. This persistence in volatility is fuelled by technical features that facilitate the build up of mimetic behaviours (amplifying effects), or that reinforce the links between the various market segments (diffusion effects). Mimetic behaviour is of course by no means a new phenomenon on financial markets. However benchmarking, index management, and risk management techniques may have gradually reinforced this type of behaviour, as participants are under increasing pressure to follow their peers through matching the performance of a benchmark. There is no doubt that the spread of benchmarking allows fund managers and clients to better assess their performance against that of other funds. But, in a context of growing competition within the sector, it may well have increased mimetic behaviour. Some market participants (whose own compensation is closely linked to the relative, rather than absolute, profit and losses they generate) may indeed have come to the conclusion that it would be better to be wrong along with everybody else, rather than to run the risk of being right alone. A striking example of rational mimetic behaviour is the influence that hedge funds posess as “opinion leaders” and trend setters.

And it’s a sign of what needs to come – because, according to the UN, emissions need to fall by a similar amount every single year for the next decade if we are to avoid the disastrous consequences of global warming.9  Chart 1: Global CO2 emissions  Chart 2: Orderly vs disorderly transition  Source: Global Carbon Project https://www.globalcarbonproject.org/index.htm Source: IIASA NGFS Climate Scenarios Database, using marker models. ‘GHGs’ = greenhouse gases. That won’t happen easily – or on its own. It turns out that the only previous material reductions in global emissions have been by-products of disasters like Covid, the financial crisis of 2008-9, World War 2, or the Great Depression (Chart 1). But relying on future disasters to force adjustment is not a plan. Orderly transition requires concerted efforts across every sector and country in the global economy. Start late, and the best case is severe economic disruption, at least as bad as in 2008-9 (Chart 2 – yellow line). Leave it completely and temperatures will soar, causing untold physical, human and economic damage (Chart 2 – grey line). Responsibility for making the hard political choices to bring about orderly transition lies with governments. In the UK, greenhouse emissions have already halved in the past thirty years (Chart 3), one of the best performances in the G7. To get to net zero, we need the same again – and that’s why the Government has committed to reduce emissions to 78% of 1990 levels by 2035, and net zero by 2050.